An already convoluted outlook for markets was complicated further on Friday by a jobs report seen likely to embolden the Fed on the path to what officials spent most of the week insisting will eventually be restrictive policy settings.
The labor market’s optically strong performance in July seemed to validate the contention that the world’s largest economy isn’t in a recession, regardless of what any rule of thumb has to say on the matter.
The White House was pleased with the numbers. “More people are working than at any point in American history,” Joe Biden declared, in a celebratory press release.
I suppose you could argue presidents have always live-“blogged” good economic news within the technological confines of their day. But it certainly feels like the literal live-blogging of macro developments was a precedent set by Donald Trump, now being perpetuated by his successor.
“That’s millions of families with the dignity and peace of mind that a paycheck provides,” Biden went on to say Friday.
The joke is as obvious as it is sad. Inflation-adjusted wages are falling at the fastest pace on record, according to government data. The figure (below) comes from last week’s employment cost index report.
Adjusted for inflation, private sector wages and salaries fell the second most on record during the three-month period from April to June, trailing only the first three months of 2022. (I say “on record.” There are probably worse stretches, and the severity obviously varies by industry. Suffice to say that for many American workers, 2022 is defined by the cruelly ironic juxtaposition between the hottest nominal wage growth in decades, and inflation so high that the end result is the rapid erosion of buying power. Workers are richer and poorer at the same time. They’re richer until they try to buy something.)
The hourly earnings data accompanying Friday’s jobs report suggested even in sectors where wage growth is especially torrid, it still trails inflation. For example, the YoY pace of wage gains for non-managers in leisure and hospitality during July was a blistering 8.6%. After adjusting for 12-month headline CPI (from June, since we don’t have July’s data yet), workers are nevertheless staring at the prospect of flat wage growth, at best. Negative inflation-adjusted wage growth for that cohort wouldn’t be out of the ordinary (which is why I didn’t include a chart), but what’s notable is the reversal of fortune over just six months. For that group, average hourly earnings were growing at a near 17% clip in December. Between the explosion higher in inflation and cooler wage growth, they’re now on the brink of experiencing de facto pay cuts along with so many other “dignified” paycheck recipients in 2022.
Biden is correct to say that “millions of families” are enjoying “the dignity” that goes along with being employed. And I’d never downplay that. But the dignity Biden described isn’t equal parts pride and spending power. This isn’t your grandfather coming home at 5:30 for dinner, genuinely gratified by a hard day’s work and satisfied with a decent paycheck and a pension promise. Sure, it’s embarrassing to be jobless. But it’s far more embarrassing to be broke. And although having some money is better than having no money, to the extent the “peace of mind” (as Biden put it) that goes along with having a paycheck is related to the buying power that paycheck confers, Americans’ peace of mind is becoming less peaceful all the time.
The figure (above) is a stark reminder that many workers have never felt less secure in their family’s financial situation than they did last month. According to the University of Michigan’s consumer sentiment survey, Americans’ perceptions of their personal finances are the bleakest in more than a decade.
Biden on Friday took sole credit for the labor market recovery. “It’s the result of my economic plan to build the economy from the bottom up and middle out,” he said. “I ran for president to rebuild the middle class — there’s more work to do, but today’s jobs report shows we are making significant progress for working families.”
I’ve said it time and again: The Fed will take the fall for inflation and get none of the credit for jobs.
Earlier this week, during the same Reuters-hosted Twitter event discussed here, Mary Daly caused a stir among the intolerably discordant “community” of finance-focused Twitter users, who lost their collective mind when she conceded that, by virtue of her fortuitous economic circumstances, she’s not personally affected by inflation in a meaningful way.
“I don’t feel the pain of inflation anymore. I see prices rising, but I have enough that I can make substitutions… and many, many Americans have enough,” she said.
Some might call that candor. Others called for her immediate resignation. Needless to say, Daly’s remarks were taken out of context. Below find the full quote from the Twitter Spaces conversation:
You know I have to say that I live… You know I don’t feel the pain of inflation anymore. I see prices rising but I have enough that I can make substitutions, that I can do things. So I’m not immune to gas prices, rising food prices… I sometimes balk at the price of things, but I don’t find myself in a space where I have to make tradeoffs because I have enough and many, many Americans have enough. But I see regularly and I recognize what it feels like when you don’t have that situation. When you live so close to the edge of your income that rising prices actually force real tradeoffs. You may not be able to go [on] the vacation you want. You may end up you know, instead, camping or doing a staycation or eating [at] your hotel because you can’t really afford getting there and then going out to dinner once you’re at the hotel. I see all of that. So, I’m fine because I have a sufficient income to make those tradeoffs. For other people, that’s not the case, and those are the people that this is so important for.
Some of you may chafe at Daly’s remarks, even in context. But I’m not sure why. What, exactly, was she supposed to say? Should she lie and say she doesn’t have enough to eat? Or maybe just do what everyone else does: Pretend to empathize when, as I never tire of reminding readers, true empathy simply isn’t possible.
Even when two people experience the same challenges in life, they experience them differently. I reiterate that point at regular intervals because I think it’s important we recognize life’s harsh realities. You can’t empathize with someone in whose shoes you’ve never walked. And even if you have walked in their shoes, you still don’t know how they experience the same hardship you experienced. Empathy, in a strictly literal sense of the word, isn’t possible.
At the end of the day, the problem for both the Biden administration and the Powell administration (if you will) is that having a job isn’t enough. For today’s Americans, there’s not much “dignity” in the mere fact of having a paycheck, let alone one that’s being eroded in real time by rampant inflation.
As Giovanni Ribisi’s “Seth” put it in Boiler Room, “There’s no honor in taking that after-school job at Mickey D’s. The honor’s in the dollar, kid.”
That was 22 years ago. If you can recite Ribisi’s monologue (and many of you probably can) you know it rings especially true in the era of Ethereum fever dreams and meme stock manias. “I read this article a while back that said that Microsoft employs more millionaire secretaries that any other company in the world,” Ribisi said, narrating. He went on:
They took stock options over Christmas bonuses. It was a good move. I remember there was this picture of one of the groundskeepers next to his Ferrari. Blew my mind. You see that and it just plants seeds. Makes you think it’s possible, even easy. And then you turn on the TV, and there’s just more of it. The lottery winner, that kid actor that just made 20 million on his last movie, that internet stock that shot through the roof.
Mickey D’s is paying its “hardworking” employees a lot more these days than they were back then. But they’re also charging more for cheeseburgers.
The problem with Daly’s comment isn’t so much her own personal experience but rather her contrasting example. Americans forced to ‘eat at their hotel room’ as an example of the pain Americans are experiencing makes it an open question of whether she’s out of touch or merely seems it.
There was a time in her life that Janet Yellen might have been a person eating in her hotel room. Would she have been qualified to be a voting member of the Fed at that point in her life?
FYI, I took a staycation just because I wanted to spend time in my garden.
The Fed’s jobs are to keep inflation in a range, keep unemployment in a range, and keep the financial system working. Those tasks are hard enough. Let someone else have the job of being the in-touch-feel-your-pain-empathy-exhibitor.
Most of FinTwit isn’t any more in touch with poor Americans than anyone’s else. To the extent any of them are “poor”, it’s usually the kind of “poor” experienced by well-educated finance-y people who are just starting their lucrative careers, between lucrative positions, or not good enough to have a lucrative gig. You know, like “broke MBA student poor”.
What I dislike about “Finance Twitter” is the extent to which everyone purports to be Libertarians, despite the vast majority seeming to be totally bereft when it comes to naming even one thinker from the Libertarian tradition. Many of them seem genuinely oblivious to the rich intellectual history and the copious number of classic treatises that form the basis of Libertarian thought. They seem to think that re-posting clips of Rand Paul questioning congressional witnesses and sharing articles from conspiracy theory web portals makes them Libertarians. As someone who was obsessed with early Libertarian political treatises when I was a young man, the haphazard hijacking of political philosophy by thousands of uninformed, irritable day traders, bloggers, fund managers and VCs ranging from the totally insignificant to some of the biggest names in the business, is highly distressing. They inadvertently insult a tradition that includes some of the best minds in modern human history. It’s too much for me. I highly doubt that some of the most famous historical Libertarians would recognize what’s being promoted under their banner today, and I think most would disavow it completely.
They saw an Ayn Rand book once, so they are experts about Libertarianism.
I prune my FinTwit feed pretty aggressively, to keep the S-to-N sort of ok.
H- this post offers a great little insight into the “pandora’s box” that is opened when someone uses the word ‘libertarian’ to describe their politics and philosophy. And I definitely chuckled when reading your words, “it is too much for me”.
We can (pretty much) all agree that we positively identify with the Latin word, libertas, but after that- when someone tells me they are libertarian- much more information is needed for me to understand what they actually mean by that. Are they identifying with some of the classical thinkers, Austrian school (Mises), modern day right leaning or modern day left leaning….? What are their specific beliefs on personal property rights and capital?
My observation is that people like to use that word to describe themselves in order to justify not wanting to follow any rules that do not result in a direct benefit to them, personally.
I stopped using that word to describe my political and philosophical beliefs when talking with people I do not know very well because no one ever asked me what I actually meant by that.
Having said that – I am definitely a libertarian!
Can you imagine what Hayek would have to say about today’s geopolitical landscape? He’d take one look and get on the first plane to Switzerland.
There are no one word descriptions of group membership that mean anything consistent in this day and age (maybe in any day and age). Every word that starts to trend becomes co-opted by thousands and coincidentally loses all meaning. We end up chasing ghosts and are left running in place.
Well, there is the batshitcrazy group that continues to insist that the only thing that happened on January 6, 2021 was a peaceful protest and failure to reelect tRump will doom the Union.
The thing about using labels to describe oneself or others seems handy and time-saving but it’s not since most people who attach a label to themselves have to explain it to others who never seem to know what it actually means. My late boss hated labels and discussions of labels. He would get very impatient and say something like: “Who cares what you call (something something), call it Fred and lets get on with it. Me, I’m a “Fred” because I don’t know the definitions of Progressives, Liberals, neo-anythings, Libertarians, Conservatives, whatever.
Thank you for your point on empathy (the impossibility of). Cannot be emphasized enough, yet no one emphasizes it.