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Are you suggesting that people are missing in the workforce in the US because of the federal reserve's policies, and if so, by what mechanism do you believe thi

Are you suggesting that people are missing in the workforce in the US because of the federal reserve's policies, and if so, by what mechanism do you believe this is happening?

nostromo 4y ago
Primarily by reducing lower working class wages via inflation. It is now more expensive for a number of people to work than it is to not work, which often requires childcare, transportation, and food near the job. The housing bubble also pushed these people further away from job centers. Both are a direct result of the federal reserve with a lot of help from congress.
- toomuchtodo 4y ago
  The federal reserve has a blunt instrument, the target benchmark rate, to control aggregate demand. Raising the rate destroys demand. Why is raising the target rate good? Destroying demand slows inflation. It also deflates asset bubbles (real estate, equities, etc). Does it negatively impact employment? Typically, it increases unemployment, but perhaps not in our current circumstances due to labor supply shortages [1] [2]. The Fed has engineered a soft landing and some moderate wage gains have occurred over the last 1-2 years. It’s up to workers to organize if they want to accelerate wage increases and lock them in. Fiscal policy is the domain of Congress, and at this time (most unfortunately), they aren’t willing to do anything to improve Labor’s situation. I do want to touch on why the Fed took extraordinary measures during the pandemic (both with lowering the benchmark rate and with acting as a backstop of last resort wrt buying large swaths of bonds) [3]. With enormous uncertainty at the time (will there be a vaccine? When if at all?), there was a risk of total economic collapse and loss of collective faith. Lowering the benchmark rate was like a pilot light ready to relight the economy once lockdowns were lifted, and them buying bonds ensured liquidity (preventing a collapse in bond values, as well as the mortgage backed securities market freezing up). There is strong evidence that remote work allowances during the pandemic contributed to driving up home prices [4], but zero interest rate policy didn’t help frothy real estate prices either. [1] https://news.ycombinator.com/item?id=34554546 https://news.ycombinator.com/item?id=34554546 [2] https://www.federalreserve.gov/econres/feds/files/2022081pap.pdf https://www.federalreserve.gov/econres/feds/files/2022081pap... [3] https://archive.is/2020.03.24-154938/https://www.nytimes.com/2020/03/23/business/economy/coronavirus-fed-bond-buying.html https://archive.is/2020.03.24-154938/https://www.nytimes.com... [4] https://archive.is/2M8lC https://archive.is/2M8lC
  - uoaei 4y ago
    When you're holding a ~~hammer~~ central bank, everything looks like ~~a nail~~ interest rate adjustments.
  - latency-guy2 4y ago
    The Fed is strictly against labor, even by their own statements as well as Powell's own words numerous times. Their plan is to depress wages [1] and remove power from labor component of the economy. If any indication is correct, then the most recent tech layoffs are a compliance move to the fed's goals (^a). It's not a willing situation out of lack of care, when the will is strictly antagonistic. [1] https://www.bloomberg.com/news/articles/2022-03-17/powell-treads-tricky-path-in-saying-wages-are-rising-too-fast https://www.bloomberg.com/news/articles/2022-03-17/powell-tr... ^a, I'm willing to forgive some tech companies because it was a deliberate twist of the arm by raising rates.
    - toomuchtodo 4y ago
      The Fed might believe they are adversarial against labor (I’m aware of Yellen’s and Powell’s labor comments during their tenures as Fed chairs), but they have an uphill battle against structural demographics and an inverse population pyramid. Tech layoffs are Capital dictating to management to improve profits. If you don’t like it, unionize (dead serious). To not do so means continued powerlessness and to be at the whims of billionaire fund managers whining about their fund performance. Even with the total tech layoffs this year and last (~250k per layoffs.fyi), that’s one month of US added payrolls. I understand they’re not equivalent roles and pay, but I suggest taking it into consideration as a macro sign. It’s not 2001 or 2008.
      - latency-guy2 4y ago
        The US does not have a true inverse population pyramid, it is only true for the next few years, maximum 10 years. The Fed is fully aware of this, pushing off too much capital to the generation with the least amount of labor is terrible idea for their goals. The US is also fully positioned to mitigate the effects of the thinning labor market to a place where we are minimally impacted by depressed growth by way of immigration, strategic investments in silicon, semiconductors, the complete demographic collapse of China that is currently underway, and numerous other items including a strengthened relationship with the EU. The US, and further the Fed have little to worry about by way of demographics. Tech layoffs consist of more than 'Capital', significantly more. 'Capital' is not reacting out of pure hatred for labor either, they are reacting to a specific phenomena, which is the Fed swiftly raising rates.
- milkshakes 4y ago
  The government has tools to target inflation without reducing lower working class wages. Unfortunately, they lie in the domain of fiscal policy, not monetary policy, which only really has a hammer.
- refurb 4y ago
  You're saying because wages don't keep up with inflation people just decide not to work at all? What do they do for money?
  - astrange 4y ago
    Lower-wage workers' wages have increased over inflation and in fact are the only wages that have done so. It's an unchanging fact of the internet that people show up complaining about inflation/the Fed/not being on the gold standard and are always cranks. Strangely, this is still true even when there is inflation.
  - tolciho 4y ago
    Do, said the fish, what do they do for want of water? Coast, contribute to excess deaths, live in a basement, take odd jobs that are more or less on the books, panhandle, join a monestary...
    - refurb 4y ago
      What does "coast" mean? Or "living in a basement"? Those don't get your money you need to live.
- mildchalupa 4y ago
  So it's interesting. The stated goal of the fed is to keep inflation and unemployment low. As of recently one of the reasons for the inflation is supply chain disruptions stemming from the shutdown of China. Over the last 13 years the fed has played a much greater role in the market by purchasing securities and setting the discount rate near to zero. The goal being to soften the blow of the housing collapse and to help being the economy back up. What I find interesting about the low interest rate is that low cost lending changes what types of projects are economically viable. If you look at the formula for NPV the discount rate is within the denominator. What this is saying in other terms is that a projects value is manipulated by the discount rate. On the whole low yield capitally intensive projects are possible to take on during a time of low lending costs. Sure the math makes sense here but what does this mean in aggregate. Does it make sense that the value a project supplies to humanity is dependent on the interest rate? No it really does not, it's not required for it to be proportional whatsoever. Capital is just a standardized term for motivation. All that money can buy is someone else's time or effort at the end of the day. What the NPV formula is truly giving us is a ratio of how much human effort will be required and how much output you are likely to get from such efforts. One of our issues both nationally and globally is that our interest rate is too low, (and we have no way to fairly correct for this). Higher cost of lending prunes projects that are low yield. This prunes projects that are not a large benefit to society. The fed has a hard time moving back to this because of the extreme difficulty everyone would face. Let's say they raise the rates to 18% suddenly homes value must drop to reflect the people's ability to pay the new mortgage rates. Best case this would dramatically reduce worker mobility. Worst case you wipe out the largest asset most might have. I do believe the fed is used as a tool is used to keep people working. If you track the cost of staples such as a loaf of bread or milk vs the hours required to earn such things on minimum wage you will find that it's all about the same over time. Logically this makes no sense whatsoever. Does this mean that we have gotten no better at producing these commodities over the last 100 years?
  - WalterBright 4y ago
    If supply chain disruption caused inflation, we'd see deflation when the disruption ends. The same for other alleged causes of inflation the government puts out. The explanation that stands up, however, is the government printing and spending excessive amounts money, backed only by the promise to print even more.
- Barrin92 4y ago
  >Primarily by reducing lower working class wages via inflation There's no indication that this is a real thing given that leisure, hospitality, transport and warehouse workers have seen the strongest wage growths in decades, the first two groups outpacing inflation and seeing real wage gains. In fact fairly large wage increases in the service economy are one of the biggest contributors to inflation (wage-push inflation) and the basis for these rapid pay rises is the constantly tight labor market, hence the title of the thread.
salawat 4y ago
I mean... Look at the layoffs going on right now. It's not like it's hard; and mind, I think it's a good thing interest rates are going up, bringing a return to sanity to the economic landscape, but the Federal Reserve by it's own admission wanted to increase unemployment. They succeeded. Now they're screeching because people are dropping out of the rat race/clearly orchestrated insane financial environnent because it is straight up clear to anyone with more than a handful of neurons to rub together that things have been completely unsustainable for a while? Color me surprised. /s

Are you suggesting that people are missing in the workforce in the US because of the federal reserve's policies, and if so, by what mechanism do you believe this is happening?

nostromo 4y ago

Primarily by reducing lower working class wages via inflation. It is now more expensive for a number of people to work than it is to not work, which often requires childcare, transportation, and food near the job. The housing bubble also pushed these people further away from job centers. Both are a direct result of the federal reserve with a lot of help from congress.

toomuchtodo 4y ago
The federal reserve has a blunt instrument, the target benchmark rate, to control aggregate demand. Raising the rate destroys demand. Why is raising the target rate good? Destroying demand slows inflation. It also deflates asset bubbles (real estate, equities, etc). Does it negatively impact employment? Typically, it increases unemployment, but perhaps not in our current circumstances due to labor supply shortages [1] [2]. The Fed has engineered a soft landing and some moderate wage gains have occurred over the last 1-2 years. It’s up to workers to organize if they want to accelerate wage increases and lock them in. Fiscal policy is the domain of Congress, and at this time (most unfortunately), they aren’t willing to do anything to improve Labor’s situation. I do want to touch on why the Fed took extraordinary measures during the pandemic (both with lowering the benchmark rate and with acting as a backstop of last resort wrt buying large swaths of bonds) [3]. With enormous uncertainty at the time (will there be a vaccine? When if at all?), there was a risk of total economic collapse and loss of collective faith. Lowering the benchmark rate was like a pilot light ready to relight the economy once lockdowns were lifted, and them buying bonds ensured liquidity (preventing a collapse in bond values, as well as the mortgage backed securities market freezing up). There is strong evidence that remote work allowances during the pandemic contributed to driving up home prices [4], but zero interest rate policy didn’t help frothy real estate prices either. [1] https://news.ycombinator.com/item?id=34554546 https://news.ycombinator.com/item?id=34554546 [2] https://www.federalreserve.gov/econres/feds/files/2022081pap.pdf https://www.federalreserve.gov/econres/feds/files/2022081pap... [3] https://archive.is/2020.03.24-154938/https://www.nytimes.com/2020/03/23/business/economy/coronavirus-fed-bond-buying.html https://archive.is/2020.03.24-154938/https://www.nytimes.com... [4] https://archive.is/2M8lC https://archive.is/2M8lC
- uoaei 4y ago
  When you're holding a ~~hammer~~ central bank, everything looks like ~~a nail~~ interest rate adjustments.
- latency-guy2 4y ago
  The Fed is strictly against labor, even by their own statements as well as Powell's own words numerous times. Their plan is to depress wages [1] and remove power from labor component of the economy. If any indication is correct, then the most recent tech layoffs are a compliance move to the fed's goals (^a). It's not a willing situation out of lack of care, when the will is strictly antagonistic. [1] https://www.bloomberg.com/news/articles/2022-03-17/powell-treads-tricky-path-in-saying-wages-are-rising-too-fast https://www.bloomberg.com/news/articles/2022-03-17/powell-tr... ^a, I'm willing to forgive some tech companies because it was a deliberate twist of the arm by raising rates.
  - toomuchtodo 4y ago
    The Fed might believe they are adversarial against labor (I’m aware of Yellen’s and Powell’s labor comments during their tenures as Fed chairs), but they have an uphill battle against structural demographics and an inverse population pyramid. Tech layoffs are Capital dictating to management to improve profits. If you don’t like it, unionize (dead serious). To not do so means continued powerlessness and to be at the whims of billionaire fund managers whining about their fund performance. Even with the total tech layoffs this year and last (~250k per layoffs.fyi), that’s one month of US added payrolls. I understand they’re not equivalent roles and pay, but I suggest taking it into consideration as a macro sign. It’s not 2001 or 2008.
    - latency-guy2 4y ago
      The US does not have a true inverse population pyramid, it is only true for the next few years, maximum 10 years. The Fed is fully aware of this, pushing off too much capital to the generation with the least amount of labor is terrible idea for their goals. The US is also fully positioned to mitigate the effects of the thinning labor market to a place where we are minimally impacted by depressed growth by way of immigration, strategic investments in silicon, semiconductors, the complete demographic collapse of China that is currently underway, and numerous other items including a strengthened relationship with the EU. The US, and further the Fed have little to worry about by way of demographics. Tech layoffs consist of more than 'Capital', significantly more. 'Capital' is not reacting out of pure hatred for labor either, they are reacting to a specific phenomena, which is the Fed swiftly raising rates.
milkshakes 4y ago
The government has tools to target inflation without reducing lower working class wages. Unfortunately, they lie in the domain of fiscal policy, not monetary policy, which only really has a hammer.
refurb 4y ago
You're saying because wages don't keep up with inflation people just decide not to work at all? What do they do for money?
- astrange 4y ago
  Lower-wage workers' wages have increased over inflation and in fact are the only wages that have done so. It's an unchanging fact of the internet that people show up complaining about inflation/the Fed/not being on the gold standard and are always cranks. Strangely, this is still true even when there is inflation.
- tolciho 4y ago
  Do, said the fish, what do they do for want of water? Coast, contribute to excess deaths, live in a basement, take odd jobs that are more or less on the books, panhandle, join a monestary...
  - refurb 4y ago
    What does "coast" mean? Or "living in a basement"? Those don't get your money you need to live.
mildchalupa 4y ago
So it's interesting. The stated goal of the fed is to keep inflation and unemployment low. As of recently one of the reasons for the inflation is supply chain disruptions stemming from the shutdown of China. Over the last 13 years the fed has played a much greater role in the market by purchasing securities and setting the discount rate near to zero. The goal being to soften the blow of the housing collapse and to help being the economy back up. What I find interesting about the low interest rate is that low cost lending changes what types of projects are economically viable. If you look at the formula for NPV the discount rate is within the denominator. What this is saying in other terms is that a projects value is manipulated by the discount rate. On the whole low yield capitally intensive projects are possible to take on during a time of low lending costs. Sure the math makes sense here but what does this mean in aggregate. Does it make sense that the value a project supplies to humanity is dependent on the interest rate? No it really does not, it's not required for it to be proportional whatsoever. Capital is just a standardized term for motivation. All that money can buy is someone else's time or effort at the end of the day. What the NPV formula is truly giving us is a ratio of how much human effort will be required and how much output you are likely to get from such efforts. One of our issues both nationally and globally is that our interest rate is too low, (and we have no way to fairly correct for this). Higher cost of lending prunes projects that are low yield. This prunes projects that are not a large benefit to society. The fed has a hard time moving back to this because of the extreme difficulty everyone would face. Let's say they raise the rates to 18% suddenly homes value must drop to reflect the people's ability to pay the new mortgage rates. Best case this would dramatically reduce worker mobility. Worst case you wipe out the largest asset most might have. I do believe the fed is used as a tool is used to keep people working. If you track the cost of staples such as a loaf of bread or milk vs the hours required to earn such things on minimum wage you will find that it's all about the same over time. Logically this makes no sense whatsoever. Does this mean that we have gotten no better at producing these commodities over the last 100 years?
- WalterBright 4y ago
  If supply chain disruption caused inflation, we'd see deflation when the disruption ends. The same for other alleged causes of inflation the government puts out. The explanation that stands up, however, is the government printing and spending excessive amounts money, backed only by the promise to print even more.
Barrin92 4y ago
>Primarily by reducing lower working class wages via inflation There's no indication that this is a real thing given that leisure, hospitality, transport and warehouse workers have seen the strongest wage growths in decades, the first two groups outpacing inflation and seeing real wage gains. In fact fairly large wage increases in the service economy are one of the biggest contributors to inflation (wage-push inflation) and the basis for these rapid pay rises is the constantly tight labor market, hence the title of the thread.

salawat 4y ago

I mean... Look at the layoffs going on right now. It's not like it's hard; and mind, I think it's a good thing interest rates are going up, bringing a return to sanity to the economic landscape, but the Federal Reserve by it's own admission wanted to increase unemployment. They succeeded. Now they're screeching because people are dropping out of the rat race/clearly orchestrated insane financial environnent because it is straight up clear to anyone with more than a handful of neurons to rub together that things have been completely unsustainable for a while? Color me surprised. /s