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The Federal Reserve’s War On Jobs

Economist and investment guru Joel L. Naroff has an interesting take on all of the good job creation news expected this week – it will likely cause the Federal Reserve to hike interest rates yet again.

In a column for NewsMaxFinancial “Continued Strong Jobs Hiring Will Push Fed to Hike Rates” Naroff says, “The continued strength in hiring has to provide support for the members’ belief that they can continue to raise interest rates without materially affecting the economy. So, what we need to watch is the statement and how Wall Streetstrong a signal it sends that the next tightening is coming. Most economists, including myself, expect a rate hike at the June 12-13 meeting.”

Now here’s the real kicker. Naroff says “In June, we also get the Fed members’ forecasts, which could point to four rather than three increases this year and I think an increase in what may be the terminal rate for this cycle. That would point to four increases, next year as well, which is where I stand.”

In the simplest terms Naroff is predicting that the Fed will manage the growth of the economy on the backs of job-seekers, by raising the interest rate job-creators must pay to build the plants and buy the equipment and inventory necessary to create more jobs.

But is the hiring and employment environment so hot that an inflationary labor shortage is upon us?

The facts Naroff cites would seem to say no.

According to ADP, says Naroff, firms were out adding workers at a very solid, if not strong pace in April. The gains were spread fairly evenly across the different sizes of firms, though companies with 50 to 499 workers were the most active. Looking at the specific industries, the need for construction workers remains robust, while health care employees are also in strong demand. The only sector where jobs declined was information services.

Naroff also noted the number of want ads posted online faded in April. The Conference Board’s Help Wanted OnLine Index fell, but it has been bouncing around quite a bit lately. That said, the level of want ads is still high enough that we should see solid hiring going forward. There were declines in every region, though the greatest weakness was the Northeast, New York in particular. As for occupations, the demand for computer and mathematics experts continues to soar, while sales people are no longer needed as much.

Our friends at Breitbart report that Treasury Secretary Steven Mnuchin does not see signs of a labor shortage. In an interview at the Milken Institute’s Global Conference in Los Angeles on Monday, Mnuchin brushed aside talk about a labor shortage from Fox Business Network’s Maria Bartiromo.

When Bartiromo pressed the issue, Mnuchin pushed back again.

Businesses hoping the administration will expand programs for foreign workers have been arguing that they cannot find enough workers. But as Minnesota Fed President Neel Kashkari has argued, there is no objective evidence of a labor shortage.

Bartiromo also asked Mnuchin about inflation and recent signs that wages were rising. “We want wages to go up. A little bit of inflation is a good thing. Too much isn’t a good thing but I see only a little bit,” Mnuchin said. Mnuchin added that he sees no signs of too much inflation in the future, reported Breitbart’s John Carney.

A year and a half into the Trump presidency the American economy has seen solid growth, more people in jobs and Wall Street has broken records on a regular basis.

However, in the alternative universe where Wall Street’s Masters of the Universe and the mandarins who control America’s Federal Reserve Bank live, good news for America’s middle-income families is apparently bad news.

Jed Graham of Investor’s Business Daily said a while back that “wage hikes from the likes of Walmart, Starbucks, and JPMorgan Chase announced in the wake of tax reform provide some reason to expect a pickup from the lackluster gains of recent years, IBD presented three reasons why the January pay raise reported by the Labor Department was less than meets the eye. Still, investors' reaction reflects Wall Street's nervousness about leaving behind a Goldilocks era of so-so economic growth and tepid inflation, accompanied by strong stock market gains.

In other words, low inflation, accompanied by slow economic growth, no wage gains and higher unemployment is the goal the policymakers are seeking to sustain “strong stock market gains.”

President Trump campaigned on policies that would boost the economy to 4 percent – or greater – growth. Now, just when America’s hard-pressed middle-income families are beginning to see the benefits of Trump’s policies, is not the time for the Fed to cool the economy.

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