The Jobs Conundrum Continues?

Leo Kolivakis  |

Jeff Cox of CNBC reports, The jobs 'conundrum' continues: 'How are we not getting higher wages?':

Another month, another jobs report, which signals wages aren't growing as fast as economists expected given historic low unemployment.

A tweet from Neel Kashkari from a couple of days ago says it all with his comment: "Historic worker shortage".

But inflationistas still think inflation is coming, wages will grow because the Fed is still way too accommodating as unemployment remains below the "NAIRU" level.

It's all a bunch of nonsense but thankfully there are some very smart economists like Larry Summers out there who question the “preemption of inflation based on the Phillips curve” paradigm and have been jawboning the Fed to go gently on rate hikes or risk another crisis.

The truth is inflation is a lagging economic indicator and employment is a coincident indicator and leading US and global economic indicators have peaked and have been rolling over, signaling a global slowdown ahead.

Moreover, the yield curve is at its flattest in 11 years, signaling a recession ahead, but to my amazement, the Fed is considering alternatives to this indicator. No doubt, Fed rate increases and tariff fights have exacerbated the falttening of the yield curve but it would be a grave mistake to ignore it.

A slowdown is coming, rest assured of this, we just don't know how bad it will be.

As far as jobs, it's as good as it gets, so try not to read too much into this jobs report. The next six months will show a weakening of the US labor market and you can forget about any meaningful wage increases for a very long time.

In fact, I was talking to an astute blog reader of mine yesterday who shared this with me: "Baby boomers enjoyed real wage gains and a bull market in stocks, bonds and real estate. Millennials are starting off at a terrible point, they're saddled with debt, can't afford a home, and will experience a long bear market in stocks, bonds and real estate."

I'm afraid he's absolutely right in his dire assessment but hopefully in the long run, it will all work out (however, Keynes had a famous saying about the long run...).

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