Buckle up, America: The Fed plans to sharply boost unemployment

[Nevilledog]

Link to tweet

https://www.cbsnews.com/news/fed-interest-rates-unemployment-inflation/

In case the U.S. economy wasn't hurting enough already, the Federal Reserve has a message for Americans: It's about to get much more painful.

Fed Chair Jerome Powell made that amply clear this week when the central bank projected its benchmark rate hitting 4.4% by the end of the year — even if it causes a recession.

"There will very likely be some softening of labor market conditions," Powell said on Wednesday. "We will keep at it until we are confident the job is done."

In plain English, that means unemployment. The Fed forecasts the unemployment rate to rise to 4.4% next year, from 3.7% today — a number that implies an additional 1.2 million people losing their jobs.

*snip*

[Elessar Zappa]

1. I don't understand the theory.

Why would more unemployment ease inflation?

[peppertree]

2. Monetarists claim that by doing so, you slow the economy, demand - and thereby prices

But we all know the real reason Fed Republicans are doing this: the '24 elections.

They want the economy to be nice and depressed for when Biden when for re-election. - in effect to "Carter" him.

Or "Greenspan" him, for a more recent metaphor - since they did they same thing to Gore in 1999/2000.

[tritsofme]

4. That is conspiracy theory nonsense.

Why would Biden appoint Fed officials bent on sabotaging the economy and his chances of reelection?

You must have a pretty low opinion of the president, if you think he is that dumb.

[stopdiggin]

3. the headline is misleading

the Fed is of course not trying to increase unemployment - they are (assiduously) attempting to stamp out a frightening (and very damaging) inflation curve (through interest rates) - while acknowledging that one of the the very likely attendant factors, will be some pain in the employment sector.

And, while that pain is regrettable - the overall and widespread pain and misery inherent in an extended period of rampant inflation - dwarfs the employment headache in consequence.

[snowybirdie]

5. Thank you

almost alerted this due to inaccurate headline and right leaning viewpoint. Glad you posted this more accurately.

[Nevilledog]

10. The headline is straight from CBS

[stopdiggin]

15. which makes it immune from

sloppy work, or sensational intent? The headlines clearly serves to create a false impression about the Feds intent. Either intentionally, or through negligence. If this were coming from a political organization - it would be called a masterful piece of 'spin.'

[Lancero]

23. If you're going to post a article, it's generally considered good form to...

Provide the actual title of the article, rather than giving it your own spin.

And besides, thats even before considering the attempt to smear CBS as a right-wing source. It isn't.

https://mediabiasfactcheck.com/cbs-news/

[stopdiggin]

25. And my criticism is directed at the headline

not the poster. (agree that the original headline is 'proper form') On the other hand - if I can quickly spot something that looks like 'spin' or faulty conclusion in a headline. I think I might be inclined to question the remaining content. I don't claim CBS is 'right wing' (or consistently biased) - but they were sure as heck off base with this headline. One is tempted to go with 'clickbait.'

[qazplm135]

8. more like

they believe increased unemployment is worth a decrease in inflation, or rather, they think it the lesser of two evils, the other being out of control inflation.

Fewer employed means less money to spend means less demand.

The problem is that the problem is less about demand and more about supply.

But there doesn't appear to be much more we can do about supply in the short term, so the only other tool left is to go at demand.

[DontBelieveEastisEas]

21. Less borrowing means less demand, not the fact that fewer are employed. nt

[qazplm135]

44. raising rates

is correlated with lower employment.

Less money to spend ALSO lowers demand.

[WarGamer]

31. Diasgree.

Raising unemployment certainly IS a goal... because rising unemployment reduces the number of dollars chasing goods and services.

Maybe you didn't like OP tone... but it's accurate.

The Fed is going to get GOP'ers elected... SMDH.

[stopdiggin]

33. you are, of course, free to disagree

But I will stand completely behind what I said. It is clearly not the aim (as the headline would imply) - it is a corollary. (and a considerably lesser one at that). Inflation is, so very clearly, the target - and represents a much greater threat (at a very basic and collective level) - than does a point or two of (honestly acknowledged) employment figures. You want to really kick the working class in the teeth? Try about a decades worth of rampant and persistent inflation!

Post #22 is nicely succinct.
------- -------

[Ace Rothstein]

43. Runaway inflation will get Republicans elected as well.

Pick your poison.

[Fiendish Thingy]

6. It would reduce demand for consumer goods. Nt

[Mr.Bill]

13. It helps keep wages down.

Or maybe more like keeps them from rising as fast.

[DontBelieveEastisEas]

20. I don't think it is the unemployment that is the cause.

I'm thinking the higher interest rates slows things purchasing down.

That reduces demand and fights inflation.

Per https://www.cnbc.com/select/how-do-increasing-interest-rates-affect-inflation/

By increasing the federal funds rate, the Fed makes it more expensive for banks, and therefore consumers and businesses, to borrow money.

When Businesses don't expand as much with borrowed funds and consumers by less products, there is less need for workers to build and produce. So, reduced demand, to counter inflation, has a side effect of a softer job market.

[Generic Brad]

29. It's to drive down labor costs

They don't have enough people to do the jobs currently out there because companies don't want to pay people what they are worth. So they cut jobs and create unemployment and then we get desperate and settle for low wages. Of course, the flaw with that plan is that there are even fewer people to do the work than there already are.

Small businesses will crumble because they will get squeezed out. The big companies can afford to ride this out. When all is said and done costs come down because they have cut labor costs and then they have also been able to buy up assets at a discount from desperate people.

This is good for the CEO/investor class. For the rest of us, ouch. We are viewed as a liability and are considered expendable. We are economic cannon fodder.

[uponit7771]

30. Oh it'll ease inflation but not higher prices and more across the board expensive

[Deminpenn]

41. The only tool the Fed has is control of the money supply

The Fed believes inflation is being caused by too much money chasing too few goods. IOW, a cosumer bidding war for relatively scarce goods.

The Fed is trying to contract the money supply by raising interest rates making it more expensive for borrowers thus redirecting money that might have been spent on other things to loan interest payments.

That is commercial loans for business and mortgages, credit card payments, car loans, etc for everyday Americans. If everyone is paying more for borrowing, they have less money to spend on everything else.

The end result will be less money chasing the same amount of goods, thus stabilizing prices, i.e., reducing inflation.

I'm not sure this is the entirely correct response because there are other factors like ripple effects of the war in Ukraine that has affected global food and energy supplies.

[Fiendish Thingy]

7. 3.7% is historic low unemployment, most folks have never seen

“Normal” unemployment (aka “full employment”) is around 5%

[DFW]

24. Most countries would consider 5% unemployment a lofty goal

Anything under 5% used to be considered a roaring economy.

[I_UndergroundPanther]

9. Why is it

Always we the people that have to lose jobs to appease the financial scam called the market? Especially minimum wage workers?

The bullshit people believe. The feds are not technical wizards they are rich people looking out for rich people playing a massive gambling / grift game for profit.

Profit is theft.

We can live without existing with the for profit game. That zero sum idiocy.

Thats my opinion.

[uponit7771]

34. +1, instead of surgically going after what is causing the inflation the middle income worker suffers

[Yavin4]

11. Also, the Fed wants to stall people from retiring.

Over the next 7 years or so, the entire Baby Boomer generation will be eligible for retirement. During the pandemic, a good number of them opted to retire early. Raising rates kills 401Ks and the price of housing which keeps the elders on the job for another few years or so.

Retirements are a leading cause of the overall labor shortages.

[uponit7771]

35. +1, (link)

https://www.axios.com/2022/09/03/the-workers-who-havent-come-back

[Scrivener7]

12. Can't be having strength on the labor side of the see-saw.

[uponit7771]

36. +1

[roamer65]

14. High interest rates are going to start a world wide fiscal crisis.

The high cost of borrowing is going to blow a hole through a lot of countries budgets.

[stopdiggin]

17. Spiraling inflation represents a deadly serious financial crisis

and countries around the world are either mimicking, or exceeding, the Fed's actions. The damage represented by rising interest rates - as compared to crippling effect of endemic inflation, on those same countries ... There is really no comparison. And trying to make this about unemployment - or 'little guys vs big guys' ... Is clearly a case of 'forest for the trees.'

[roamer65]

45. Prepare for high unemployment like 1980-1981 and the Great Recession.

…and a world fiscal crisis.

[Samrob]

16. Their beatdown of President Biden isn't working evidently. They are screwing the 90% and helping 10

This happened before under a two other Dem Presidents.

We will survive!

[stopdiggin]

18. so runaway inflation is

good for the working man? I think maybe we need to tighten up our arguments in places.

[uponit7771]

37. Of course not but we don't need a sledgehammer to kill a fly. This isn't 1967, we can surgically go

... after root causes of inflation without hurting the middle income earners

[stopdiggin]

42. I think the rates of inflation

that we have seen so far this year - have shocked and actually scared the crap out of a lot of people (read economists). And some of the criticisms now revolves around the Fed initially being a bit too passive and hesitant and not acting soon enough. And current thought is that the situation is more serious, and intractable, than originally thought. Right now this doesn't look like a fly. And thus the sledgehammer you refer to. You don't want to let things get to the level that earlier history informs. Baby stepping our way through this is just going to prolong the pain. I think I'm going to have to go with the Fed (or at least their judgement) on this one.

[TexasBushwhacker]

19. Losing their jobs or quitting them?

Baby Boomers are still hitting age 65 at a rate of 10K PER DAY, and will continue to for another 7 years. Sure, some retire before 65, some after, and some die, but over 3 million are leaving the workforce every year, and they aren't going back to work.

[DFW]

26. And those are 3 million jobs now open for people seeking them

I’m not retiring, but I sure wish there were a few people seeking my job! I painted myself into a corner on that score.

[DontBelieveEastisEas]

22. Very wrong headline. (by the news agency, I understand)

Last edited Sun Sep 25, 2022, 02:34 AM - Edit history (1)

The Feds plan to do something that has this side effect.

The goal of the plan is not the side effect. The side effect is not the plan.

[DFW]

27. Agreed: very poorly worded, could have been from Fox Noise

The Fed never seeks to augment unemployment unless you’re Tucker Carlson. It seeks to dim inflation, and there is also the side benefit of easing the misery of people who have put away a retirement fund while living off the interest, which in recent years has been virtually zero.

Twenty years ago when we lost our last parent, my siblings and I had the chance to put some of our inheritance into a fixed fund that paid 7% interest. My sister, who has no children, has been paying her New Jersey property tax every year with that interest. Last year at prevailing rates, she would have been lucky to pay a week’s groceries with the interest she would have received on the open market.

[NickB79]

28. There are 10 million empty job openings in the US now

Every business is struggling to find workers.

How do you raise unemployment with such a situation?

[DontBelieveEastisEas]

32. Reduce jobs with decent pay

Every business is struggling to find workers

First, you make it so that not every business is struggling to find workers.
The interest rates are said to reduce demand, thereby causing some businesses to no longer have the need to find workers.

Perhaps they cut some jobs that pay $20 an hour.

Now if a significant amount of those 10 million openings you are talking about only pay $2 an hour, they may stay open while unemployment rises.

[uponit7771]

38. "..reduce demand..." How without hurting the middle income earner? tia

[Brainfodder]

40. Prove to me first that is 10M actual openings!

If they have turned away qualified people, then they aren't actual openings.

Sorry to be so fucking skeptical, but reasons.

H.R. Depts are a waste of time for job seekers 99% certainty on that one, and the fake ads on web sites should not be counted either.

Greedy assholes and their purple dragons...

Getting jobs in America is mostly NETWORKING, we both fucked that up, unwilling to use people, OOPS!

[Yavin4]

48. Higher rates mean lower demand.

Lower demand means less businesses.

Less businesses mean less job openings.

Less job openings creates lower demand.

Repeat.

[Brainfodder]

39. Meanwhile Citizen Chaos aint under arrest?

I am also WTF on the rate increases.

Houses cost more and make the payments more painful too?

HUH?

I don't get how shit hits the fan, and price gouging increases.

Still don't raise the impossible to live on minimum wage.

Still don't try to vote through medicare for all every other week!

[David__77]

46. I hope Biden uses his platform and power to strongly oppose this.

To help with tradition - get them out if they try to impose recessionary anti growth.

[budkin]

47. JP is not a good fed

WTF is he doing??