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You can read Powell's remarks here: https://www.wsj.com/articles/transcript-fed-chief-powells-postmeeting-press-conference-11651696613 https://www.wsj.com/artic

You can read Powell's remarks here: https://www.wsj.com/articles/transcript-fed-chief-powells-postmeeting-press-conference-11651696613 https://www.wsj.com/articles/transcript-fed-chief-powells-po... Contrary to this wonderfully editorialized piece, Powell is talking about wage growth not wages themselves. Let me explain his remarks a bit more (views not my own, but let me try and more accurate reflect his remarks). Hiring and wages are increasing sharply/rapidly because the economy is running too hot. Everyone is trying to hire, but there are few/no people to hire. Everyone is trying to hire more because money is flowing and demand is high. The idea Powell has is: you need to temper demand. Reduced demand means you need less supply, which means fewer vacant jobs. You can still do this at full employment. Fewer jobs means that employers do not need to "overbid" (objection! subjective!) for labour. You'll still pay a bit of a premium, but not as much because your labour shortage isn't so urgent. Without blowing out the labour budget so badly, prices won't increase so quickly, and so inflation tempers. Powell's of the opinion that the lowest earners need stability more than they need rapidly increased wages. Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability), and he doesn't want to see those increase wages simply feed into increased prices. in fact, Powell talks about how he wants long, expansionary runs and not short-run inflationary runs. Expansion of the economy is good. Inflation is not. It diminishes purchasing power of everyday people, especially those not heavily into inflation-riding securities. that being said, I think it's a fair criticism that worker wages are not the only component here, as the economist points out. Corporate America is pining for maximum ROI, for both executives and shareholders.

MAGZine 4y ago
As a sidebar, you probably can see this already happening inside tech. Which companies do you know have frozen hiring? What will it do to your job prospects?
exceptione 4y ago
> Without blowing out the labour budget so badly, prices won't increase so quickly, and so inflation tempers. In Europe inflation seems to be primarily been driven by supply shortages, and the rise of food and fuel prices later on. We don´t discuss China often, but they are shutting of complete cities at this moment, driven by the zero-covid policy from Xi (who has committed himself politically to it). This really results in huge production/shipping delays. This comes on top of all the other disruption of supply chains we had in the past covid years. Normally you rise the interest rate to tamper demand. But one could argue that we have a very special case here at hand, where the problem is on the supply side of things rather than the demand side. The US might be a bit different here compared to Europe, as the former did inject more money directly into the economy than the latter. But it would be good to investigate what part of the current inflation is driven by too much demand vs which by a shortage of supply. > Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability), Indeed, a Central Bank's main purpose is to provide price stability, and to allow for just a little bit of inflation to keep things going.
cudgy 4y ago
> Powell's of the opinion that the lowest earners need stability more than they need rapidly increased wages. Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability), and he doesn't want to see those increase wages simply feed into increased prices. That is an excellent way to say that the Fed is looking out for workers by keeping their wages lower when for one of the few times in over three decades, the workers have gained some traction in real terms.

MAGZine 4y ago

As a sidebar, you probably can see this already happening inside tech. Which companies do you know have frozen hiring? What will it do to your job prospects?

exceptione 4y ago

> Without blowing out the labour budget so badly, prices won't increase so quickly, and so inflation tempers. In Europe inflation seems to be primarily been driven by supply shortages, and the rise of food and fuel prices later on. We don´t discuss China often, but they are shutting of complete cities at this moment, driven by the zero-covid policy from Xi (who has committed himself politically to it). This really results in huge production/shipping delays. This comes on top of all the other disruption of supply chains we had in the past covid years. Normally you rise the interest rate to tamper demand. But one could argue that we have a very special case here at hand, where the problem is on the supply side of things rather than the demand side. The US might be a bit different here compared to Europe, as the former did inject more money directly into the economy than the latter. But it would be good to investigate what part of the current inflation is driven by too much demand vs which by a shortage of supply. > Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability), Indeed, a Central Bank's main purpose is to provide price stability, and to allow for just a little bit of inflation to keep things going.

cudgy 4y ago

> Powell's of the opinion that the lowest earners need stability more than they need rapidly increased wages. Not because they shouldn't make more, but because low-income households are more sensitive to price variability (prefer stability), and he doesn't want to see those increase wages simply feed into increased prices. That is an excellent way to say that the Fed is looking out for workers by keeping their wages lower when for one of the few times in over three decades, the workers have gained some traction in real terms.