9 ms·

The sad part is higher interest rates will lead to more layoffs

justinzollars 4y ago
Probably.
paulpauper 4y ago
hmm but unemployment rate is rock bottom. Under a rational expectations framework, the layoffs in anticipation of higher interest rates should have occurred 3-6 months ago. Also, unemployment was low in the 90s despite high interest rates.
- Sin2x 4y ago
  Official unemployment figures are not very meaningful: https://www.investopedia.com/financial-edge/0609/what-the-unemployment-rate-doesnt-tell-us.aspx https://www.investopedia.com/financial-edge/0609/what-the-un...
- Ancalagon 4y ago
  seems like the issue might be the economy is more active than ever and there just arent enough employable people to go around (I say employable because there seems to be a growing class of people unable or unwilling to be employed, for whatever reason). In a way it kind of looks to me like we have reached peak population, at least in the US. Every generation hereafter will have a workforce equal or less than the current in size. That is, unless birth rates change or immigration is allowed on a larger scale.
michael1999 4y ago
That is the explicit goal.
- AnimalMuppet 4y ago
  Do you mind supplying some evidence for that claim?
  - yieldcrv 4y ago
    oh wow let me find any of JPOW’s speeches on behalf of the The Fed I’ll link when I do but basically for the past 8 months he’s been explicitly saying he wants to get unemployment up, that he doesn’t mind risking the labor market in his efforts of “demand destruction”, never seen an appointed official say this before so he’s going hard Here is him being a little tame to Congress https://www.cnn.com/2022/06/23/economy/fed-jerome-powell-house-testimony/index.html https://www.cnn.com/2022/06/23/economy/fed-jerome-powell-hou... but he has some speeches where he’s basically like “we’re going to raise unemployment” not “could”, not a “maybe a soft landing is possible but here are the risks”, just pain
  - michael1999 4y ago
    Not so much in anger, but in regret. Unemployment is the means to the end of taming inflation. https://www.bloomberg.com/news/articles/2022-08-26/read-fed-chair-jerome-powell-s-speech-at-jackson-hole-symposium?leadSource=uverify%20wall https://www.bloomberg.com/news/articles/2022-08-26/read-fed-... "Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses." "The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers." He is deliberately engineering a recession to reduce aggregate demand. With luck, the recession will be soft. The goals are reducing labour cost inflation via reduced hiring and increased layoffs, which then leads to reduced consumer price inflation via reduced consumer spending due to budget constraints and negative sentiment. Standard macro 102. I'm sure if he could increase labour supply via monetary policy, he would. But he can't, so reducing labour demand is the plan.
    - AnimalMuppet 4y ago
      See, that I can buy. But that's "acceptable collateral damage" rather than "explicit goal".
avgcorrection 4y ago
Low unemployment causes inflation. Low employment is bad for rich people (employers). Inflation is also bad for rich people since their wealth decreases. No wonder high inflation is the worst thing that The Economy can experience.
- sudden_dystopia 4y ago
  Inflation is pretty bad for those in poverty too though…
- chollida1 4y ago
  Is it good for low income earners to have their food and shelter prices go up due to inflation? Inflation is considered bad because it affects everyone, though the poorer you are the more it affects you. Job losses affect those who lose their jobs and indirectly the economy due to less spending. Inflation affects everyone and run away inflation is one of the worst thing a country can experience.
  - nimish 4y ago
    If the alternative is mass unemployment I would rather pay 10% more for eggs Job losses affect the entire economy: the rich don't care since they do not rely employment and wages. In contrast the wealthy are hit enormously by inflation as they start losing in real terms. The fed prioritizing inflation over unemployment is a massive hit to the working classes. Doesn't matter if eggs only increased by 2% if you lost your home because there are no more jobs.
    - chollida1 4y ago
      > In contrast the wealthy are hit enormously by inflation as they start losing in real terms. Umm, the poor are hit far harder by inflation than the rich. And it hits everyone in a way unemployment does not, that's why its far more important to fight inflation. Ask your self this question. If inflation keeps going and interest rates go up to 10%. Who will buy the houses that come available on the market that people can no longer afford? The rich or the poor? And who will be the main sellers of those homes? The rich or the poor? https://www.brookings.edu/blog/future-development/2022/03/18/inflation-could-wreak-vengeance-on-the-worlds-poor/ https://www.brookings.edu/blog/future-development/2022/03/18... https://www.deccanherald.com/opinion/comment/does-inflation-hit-the-poor-or-the-rich-more-1112487.html https://www.deccanherald.com/opinion/comment/does-inflation-... https://goldcountrymedia.com/news/135064/how-inflation-makes-benefits-the-rich-hurts-the-poor/#:~:text=This%20happens%20because%20inflation%20hurts,way%20of%20making%20it%20up https://goldcountrymedia.com/news/135064/how-inflation-makes....
theandrewbailey 4y ago
Sadly, this proves that the economy is ultimately run on debt. Someday, maybe we, as a society, will realize that debt, credit, and lending is the way bankers scam money out of everyone else, and we collectively won't put up with it anymore. Banks often have some of the biggest and shiniest towers in downtowns all around the world. How did they get them? Interest, fees, and charges. I can't count how many times people (even on this very site!) have said something like "don't buy things with cash, invest it and get a loan for it instead because interest." It's no mystery as to why you don't have a tower, because you're paying for someone else's. Normal people figured this out such a long time ago, that a verse in the Bible says that the borrower is slave to the lender. I'm no slave. And don't be fooled by the cash and airline miles that your credit card throws at you. You're paying for those "rewards" by fees that the banks and networks charge merchants, and they're ultimately built into increased prices that everyone pays. No one got rich from those crumbs, except the bankers.
- SketchySeaBeast 4y ago
  Unfortunately debt is a part of our society. How would any business that requires a large capital investment start if not for debt? Taking on smart debt and making money off it is a way to better one's own situation. Without the ability to take on debt our social classes would stratify into the haves and have nots even greater than it is today. I don't like debt, and it has truly gotten crazy, but I don't know a way around debt.
  - bombcar 4y ago
    Debt isn’t the problem - it’s what happens when you can’t pay the debtor. Personal recourse debt is a scourge on the world, especially the poor.
- rozap 4y ago
  Except that you only live once. If I can buy a house with a mortgage and live in my own place for years of my finite existence versus trying to save money while paying for someone else's mortgage and living in a basement, what seems more rational? You only have a few dozen years left. It's no utopia, but it works well enough.
deleted 4y ago
[deleted]
themitigating 4y ago
Would a recession lead to more layoffs?

Probably.

hmm but unemployment rate is rock bottom. Under a rational expectations framework, the layoffs in anticipation of higher interest rates should have occurred 3-6 months ago. Also, unemployment was low in the 90s despite high interest rates.

Sin2x 4y ago
Official unemployment figures are not very meaningful: https://www.investopedia.com/financial-edge/0609/what-the-unemployment-rate-doesnt-tell-us.aspx https://www.investopedia.com/financial-edge/0609/what-the-un...
Ancalagon 4y ago
seems like the issue might be the economy is more active than ever and there just arent enough employable people to go around (I say employable because there seems to be a growing class of people unable or unwilling to be employed, for whatever reason). In a way it kind of looks to me like we have reached peak population, at least in the US. Every generation hereafter will have a workforce equal or less than the current in size. That is, unless birth rates change or immigration is allowed on a larger scale.

michael1999 4y ago

That is the explicit goal.

AnimalMuppet 4y ago
Do you mind supplying some evidence for that claim?
- yieldcrv 4y ago
  oh wow let me find any of JPOW’s speeches on behalf of the The Fed I’ll link when I do but basically for the past 8 months he’s been explicitly saying he wants to get unemployment up, that he doesn’t mind risking the labor market in his efforts of “demand destruction”, never seen an appointed official say this before so he’s going hard Here is him being a little tame to Congress https://www.cnn.com/2022/06/23/economy/fed-jerome-powell-house-testimony/index.html https://www.cnn.com/2022/06/23/economy/fed-jerome-powell-hou... but he has some speeches where he’s basically like “we’re going to raise unemployment” not “could”, not a “maybe a soft landing is possible but here are the risks”, just pain
- michael1999 4y ago
  Not so much in anger, but in regret. Unemployment is the means to the end of taming inflation. https://www.bloomberg.com/news/articles/2022-08-26/read-fed-chair-jerome-powell-s-speech-at-jackson-hole-symposium?leadSource=uverify%20wall https://www.bloomberg.com/news/articles/2022-08-26/read-fed-... "Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses." "The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers." He is deliberately engineering a recession to reduce aggregate demand. With luck, the recession will be soft. The goals are reducing labour cost inflation via reduced hiring and increased layoffs, which then leads to reduced consumer price inflation via reduced consumer spending due to budget constraints and negative sentiment. Standard macro 102. I'm sure if he could increase labour supply via monetary policy, he would. But he can't, so reducing labour demand is the plan.
  - AnimalMuppet 4y ago
    See, that I can buy. But that's "acceptable collateral damage" rather than "explicit goal".

avgcorrection 4y ago

Low unemployment causes inflation. Low employment is bad for rich people (employers). Inflation is also bad for rich people since their wealth decreases. No wonder high inflation is the worst thing that The Economy can experience.

sudden_dystopia 4y ago
Inflation is pretty bad for those in poverty too though…
chollida1 4y ago
Is it good for low income earners to have their food and shelter prices go up due to inflation? Inflation is considered bad because it affects everyone, though the poorer you are the more it affects you. Job losses affect those who lose their jobs and indirectly the economy due to less spending. Inflation affects everyone and run away inflation is one of the worst thing a country can experience.
- nimish 4y ago
  If the alternative is mass unemployment I would rather pay 10% more for eggs Job losses affect the entire economy: the rich don't care since they do not rely employment and wages. In contrast the wealthy are hit enormously by inflation as they start losing in real terms. The fed prioritizing inflation over unemployment is a massive hit to the working classes. Doesn't matter if eggs only increased by 2% if you lost your home because there are no more jobs.
  - chollida1 4y ago
    > In contrast the wealthy are hit enormously by inflation as they start losing in real terms. Umm, the poor are hit far harder by inflation than the rich. And it hits everyone in a way unemployment does not, that's why its far more important to fight inflation. Ask your self this question. If inflation keeps going and interest rates go up to 10%. Who will buy the houses that come available on the market that people can no longer afford? The rich or the poor? And who will be the main sellers of those homes? The rich or the poor? https://www.brookings.edu/blog/future-development/2022/03/18/inflation-could-wreak-vengeance-on-the-worlds-poor/ https://www.brookings.edu/blog/future-development/2022/03/18... https://www.deccanherald.com/opinion/comment/does-inflation-hit-the-poor-or-the-rich-more-1112487.html https://www.deccanherald.com/opinion/comment/does-inflation-... https://goldcountrymedia.com/news/135064/how-inflation-makes-benefits-the-rich-hurts-the-poor/#:~:text=This%20happens%20because%20inflation%20hurts,way%20of%20making%20it%20up https://goldcountrymedia.com/news/135064/how-inflation-makes....

theandrewbailey 4y ago

Sadly, this proves that the economy is ultimately run on debt. Someday, maybe we, as a society, will realize that debt, credit, and lending is the way bankers scam money out of everyone else, and we collectively won't put up with it anymore. Banks often have some of the biggest and shiniest towers in downtowns all around the world. How did they get them? Interest, fees, and charges. I can't count how many times people (even on this very site!) have said something like "don't buy things with cash, invest it and get a loan for it instead because interest." It's no mystery as to why you don't have a tower, because you're paying for someone else's. Normal people figured this out such a long time ago, that a verse in the Bible says that the borrower is slave to the lender. I'm no slave. And don't be fooled by the cash and airline miles that your credit card throws at you. You're paying for those "rewards" by fees that the banks and networks charge merchants, and they're ultimately built into increased prices that everyone pays. No one got rich from those crumbs, except the bankers.

SketchySeaBeast 4y ago
Unfortunately debt is a part of our society. How would any business that requires a large capital investment start if not for debt? Taking on smart debt and making money off it is a way to better one's own situation. Without the ability to take on debt our social classes would stratify into the haves and have nots even greater than it is today. I don't like debt, and it has truly gotten crazy, but I don't know a way around debt.
- bombcar 4y ago
  Debt isn’t the problem - it’s what happens when you can’t pay the debtor. Personal recourse debt is a scourge on the world, especially the poor.
rozap 4y ago
Except that you only live once. If I can buy a house with a mortgage and live in my own place for years of my finite existence versus trying to save money while paying for someone else's mortgage and living in a basement, what seems more rational? You only have a few dozen years left. It's no utopia, but it works well enough.

deleted 4y ago

[deleted]

themitigating 4y ago

Would a recession lead to more layoffs?