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Why the Fed wants corporate America to have a hiring freeze
- bin_bash 4y agoWhat if someone gets laid off during this freeze? How long is “short term”?
- touisteur 4y agoI don't understand what's going on there. Could someone please ELI5? Why is the labour market so hot in the first place? Shouldn't we all be looking for better (as in actual market rate) compensation?
- s1artibartfast 4y agoThe labor market is hot because the proportion of of the population working is down 8% since 2000, and a significant portion of the population have more cash and are buying more than ever. This came to a head during the pandemic when the number of workers spiked down and money rained from the sky https://fred.stlouisfed.org/series/CIVPART https://fred.stlouisfed.org/series/CIVPART
- mensetmanusman 4y agoThis is what population stagnation looks like, wups there are no young people to fill some jobs…
- s1artibartfast 4y agoPart of it is the boomers retiring, but the population pyramid is is fairly stable. [1] The bigger issue is fewer young people are working every year. [2] 16 to 19: -24% in the last 20 years 20 to 24: -11% in the last 20 years. 25 to 34: -3% in the last 20 years. Meanwhile, older people are working more than ever. This exaserbates issues of inequality. Essentially the young and poor are working less and the old and established are working more than ever. Without judgment on their reasons for working or not, it seems like rate of younger generations participating in the workforce is falling much faster than the size of the size of the younger generation is shrinking. https://www.populationpyramid.net/united-states-of-america/2020/ https://www.populationpyramid.net/united-states-of-america/2... https://www.bls.gov/emp/tables/civilian-labor-force-participation-rate.htm https://www.bls.gov/emp/tables/civilian-labor-force-particip...
- touisteur 4y agoAnd now I'm really curious about why the young and the poor work less. How can they participate less ? What's the mean of subsistance here ?
- s1artibartfast 4y agoFor 19-24, I assume many of them are just not working and subsisting off of their parents incomes. As for the rest, there are many ways individuals can get by. They can sustain themselves via their partner, get funds from friends and family, participate in underground workplaces, and last but not least, receive income from disability or other social services. It is worth noting that numbers are falling about twice as fact for men as women. This could be related to the fact that two women now go to college for every one man.
- odessacubbage 4y agoanecdotally i see a lot of young people basically taking moonshots at crypto or gig work while living at home because the labor market no longer seems to provide them either stability or paths to independence.
- touisteur 4y agoThanks for the explanation. There's still something (well lots) strange to me. What are these people doing? I read COVID assistance had dried up (?), and still people are not going back into the workforce? Isn't wage inflation supposed to help there, putting people 'back to work'? I mean, a big chunk of these 8% will be low-paid service jobs I keep hearing no one can hire for anymore ; shouldn't increasing wages (and, well, stopping the 'service-workers are slaves we can treat as dirt' mentality) help a lot here?
- ffggvv 4y agosome people retired a year or two early and didn’t plan on re entering the work force. especially since asset prices ballooned allowing them to do so. i think driving down asset prices and raising wages and lowered unemployment benefits will hopefully reverse some of that
- kalupa 4y agoSo, wealth is getting redistributed downwards because of inflation. Am I getting that right? Wouldn’t want that to happen. </sarcasm>
- s1artibartfast 4y agoI think that is really hard to say. Depending on where the salary growth and demand is, it could easily worsen inequality. If salary for white collar workers and inflation goes up too much, employing blue collar work becomes unprofitable and those workers get locked out of the labor market.
- amluto 4y agoI think this is likely a bit backwards. If the white collar salaries go up too much relative to blue collar salaries (or more generally if salaries become excessively widely distributed), then employing low wage workers becomes _cheap_, at least in a relative sense. This is fine for the companies that want to employ them, but it means that those employees’ incomes may increase much slower than the prices of anything they want to buy, and they get locked out of the market for consumer goods.
- s1artibartfast 4y agoI think we are saying the same thing. You are just giving the hypothetical answer where blue collar salaries stay low and I am giving the hypothetical where blue collar salaries rise. If blue collar wages stay the same, then yes labor costs are discounted. If they raise, it may make sense to eliminate the position via automation or shipping the job overseas. Wages are generally sticky, but nobody will take a job if they can't feed their family and pay rent, so inflation will eventually drive the wages up or make the position obsolete.
- ffggvv 4y agopoor people spend a higher percent of their income on gas, grocery, and rent. All the things being inflated. their wages aren’t keeping up either so no you’re wrong. actually half the reason we’re in this mess is the fed was being too woke trying to lower unemployment rate for ”marginalized” groups not because they were favoring the rich plus the fed raising rates is destroying asset prices, which are held by the rich. in fact elon and bezos etc have lost double digit percents of their net worth
- anfilt 4y agoYou need workers to make goods and service, deliver them ect... If you freezing hiring thats just gonna cause shortages for domestic goods and services. Leading write back to higher prices...
- s1artibartfast 4y agoThe current thought is that current inflation is driven more by consumer demand than supply shortage. That is to say, consumers have a lot of cash and are buying more goods than are available.
- SantalBlush 4y agoRight. So increasing rates should begin to entice more people to save their money instead of spending it, thereby cooling demand. We just haven't yet reached that point with the current rate hikes, apparently.
- kelseyfrog 4y agoWell, I don't. So it seems we're at a bit of a stalemate.
- growwrkr6 4y agoThey juiced the market to keep people hiring during COVID but now all those workers need to go back to their lower prestige and gig jobs. The are too many numerate people now to boondoggle. The story the moneyed economists quantify is distilled as “humans do this.” That there is a model of haves and have nots curated by haves is political theater, not free market economics. What the Fed wants is more gig worker insecurity as usual: https://www.nytimes.com/1997/02/27/business/job-insecurity-of-workers-is-a-big-factor-in-fed-policy.html https://www.nytimes.com/1997/02/27/business/job-insecurity-o...
- AbrahamParangi 4y agoIt never occurred to me but inflation is not necessarily a political problem, and perhaps even might be considered a good thing. Who doesn’t love the stock market going up? However inflation in consumer staples, energy, and gasoline is an enormous political problem. So what to do? The “solution”: expansive monetary policy is completely okay so long as most people don’t get any of it. Inequality is a substantially smaller political problem than the price of gasoline being too high.
- s1artibartfast 4y agoThe problem with expansive monetary policy is it trickles down, but not much gets to the bottom. Stock goes up, but workers not invested in the stock market don't like it going up. Everyone who already has stock gets richer, and buys real goods and assets. When those goods are produced overseas or by automation, not much makes it to wage workers. Eg the last 2 years where people saw their 401k double, and cost of goods and housing went up.
- syntheweave 4y agoUltimately, every asset class, including money, is something people can choose to migrate to or away from according to their ability to trade it for another asset. And with a money, the promise is that you can exchange it for anything else; so if everyone has more money they have more agency to trade for goods and services of all types. The problem is twofold: 1. Without an intervention you get the sharp shock of exuberance and crash; this behavior defined 19th century economies and eventually the 1930's depression and its following war that motivated adoption of Keynesian interventionist policy. Economic theory in the academy today is routinely defined in "post-war" terms, as if the preceding centuries did not exist, outside of researchers who make it their speciality. 2. With interventions, you introduce some form of market distortion no matter which way you frame it. The original Keynesian experiment approached a crisis in the late 1960's, because it pushed for fiscal interventions(government spending) which soaked up demand that would have gone to other sectors; when you do this, the other sectors experience rising prices, resulting in the stagflation that defined the 1970's. The transition into the Reagan era(a gradual series of shifts that mostly occurred in the 70's, marked finally with Paul Volker's new Fed policy) marked the shift towards a "lean and mean" neoliberalist approach with rising inequality, as you note: instead of trying to expand the economy through fiscal policy, we began the monetary-focused regime that has lasted up until now, of tuning inflation rates through fiat policy with a focus on allowing capital to redeploy itself wherever it saw fit. This era created a pretty harsh recession, but it did motivate growth again. But inequality eventually drags down an economy by a similar mechanism of "borrowing demand" from consumers and giving it over to capital, and since the strategy is to stimulate with low interest rates as necessary, and regulatory capture has favored keeping the good times a-flowing, we've used it more and more since 2008, until we've ended up in another stagflation crisis marked by our successively larger and larger asset bubbles. Eventually the chickens come home to roost and the resulting asset speculation carries over into consumer prices. And that's the kind of crisis that existentially threatens the dollar, because if even consumer staples are holding their value better, there is no reason to hold a dollar position, and therefore to trade and be taxed in it. The bet we are making by holding dollars is not really that this can be fixed in any permanent way, but that it can at least hold out for another cycle of growth. And that leads to the headline: pushing up unemployment is one way to suppress dollar demand. It's more palatable than having a war to reallocate assets, at least.
- mensetmanusman 4y ago“ He’s talking to corporate America, and his goal is to have companies essentially institute a hiring freeze and end the cycle of paying up for new hires.” Ahaha. What.
- gruez 4y agoBeats me. Looking at the article it looks like the whole narrative is basically from "Nicholas Colas, co-founder of DataTrek". There's no signs that anyone else agrees with his narrative. Also, searching up his name I found this on the first page: https://www.crainsnewyork.com/asked-answered/datatrek-researchs-nick-colas-predicts-strong-2022-wall-street https://www.crainsnewyork.com/asked-answered/datatrek-resear... (paywalled but the url slug should be enough to infer the content) Make of that what you will.
- zozin 4y agoThey’re trying to avoid a wage-price spiral which would likely lead to stagflation.
- HWR_14 4y agoStagflation is defined by inflation and a lack of wage growth. A wage-price spiral is, by definition, not stagflation.