Opinion: The blowout jobs report is actually three times stronger than it appears

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Labor demand was a stronger than expected 187,000 gain, with the US economy adding an additional 517,000 jobs in January (including 443,000 in the private sector). But, as incredible as the number of explosions was, the actual demand for additional labor was almost three times higher than its estimate.

today’s fresh news: Jobs report shows 517,000 gain in US employment in January

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How can the 443,000 net employees really underestimate labor demand by businesses? Because businesses have two options if they need more labor: They can hire more workers, or they can overwork their existing employees.

In January, businesses did both — in spades.

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market Watch

too many hours at work

Adding a shift is much easier than adding an employee, so businesses extended the average work week by about 18 minutes, from 34 hours and 24 minutes to 34 hours and 42 minutes. That might not sound like such a big change, but if you multiply it by the 132 million private sector workers, it adds up to a lot of extra hours at work.

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How many hours? About 160 million during the month.

, An increase in working hours would help ease labor supply shortfalls in the areas where inflation is most at risk: restaurants, hotel rooms, rents, health care and energy. ,

Government says how many hours worked in the private sector 1.2% increase in January after slight declines in November and December. If businesses had to hire new employees to work those extra hours instead of giving their current employees extra shifts, they would have to create 1.6 million new jobs.

Instead, he hired those 443,000 new private sector workers, and asked the 132 million workers who were already on payrolls to work more hours.

big pay is good

What this means for working families is good news. A 1.5% increase in the amount of wages paid in January (a 20% annual rate) which will go a long way towards helping families with higher prices they are struggling to pay . That’s a lot of eggs.

This increase in weekly wages is seen as a headache for the Federal Reserve (and thus for investors). This means the Fed could end the year raising interest rates a little more, rather than cutting them as the market was expecting.

The Fed is doing its best to reduce labor demand by raising interest rates. The Fed believes that the labor market may be so tight that companies will be forced to raise wages to attract and retain the workers they need, and this in turn will mean that companies will have to raise their wage bills. raise their selling prices to cover, a terrible wage-price spiral.

As I’ve discussed before, to anyone who has ever paid or received a wage, this theory of wage-push inflation is insane. That’s not how markets work. Companies do not raise prices because their costs increase; They raise prices when they can get away with it. They charge what the traffic will bear. Inflation is largely the result of a lack of supply, not excess demand.

workers are not driving up prices much; They are falling behind. The Bureau of Labor Statistics reported Thursday that real hourly compensation fell a record 3.8% In 2022. This means that the purchasing power of hourly wages is not keeping up.

An increase in working hours in January should bring relief to the Fed, not distress, as it will help ease labor-supply shortfalls in the sectors where inflation is most at risk: food services and hotel accommodations, construction, health care and mining.

If you want to reduce the cost of eating out, or hotel rooms, or a roof over your head, or hospital care, or energy, the best way to do that is to produce more of those things. In many cases, this means putting more labor into the job.

Fed chief Jerome Powell promised that his fight against inflation would be painful. But who will bear that pain? Workers have borne the brunt of the effects of higher prices, and now, while they are pulling their heads above water, they are being told they must also suffer the pain of the cure – unemployment.

The Fed refuses to believe that the cure for high prices is to increase supply, not decrease demand. Recession can be avoided if we adopt development.

Rex Nutting is a columnist for Marketwatch covering economics for more than 25 years.

More on Inflation and Jobs

Greg Robb: ‘Definitely less aggressive’: 4 takeaways from Powell’s press conference as the Fed hikes rates again

Jeffrey Bartsch: US employment costs rise slowly, but the Fed is still too bullish for comfort

Rex Nutting: Bigger paychecks are good news for America’s working families. Why does this bother the Fed?

Credit: www.marketwatch.com /

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