Job growth and wages are slowing. Employers added 223,000 jobs in December, the labor department reported on Friday \u2013 lower than the average in recent months.
\nAverage hourly wages rose by 4.6% in December, according to Friday\u2019s report. That\u2019s a slowdown from 4.8% in November.
\nAll this is music to the ears of\u00a0Federal Reserve\u00a0chair Jerome Powell, because the Fed blames inflation on rising wages. The Fed has been increasing interest rates to slow the economy and thereby reduce the bargaining power of workers to get wage gains.
\nAt his press conference on 14 December\u00a0announcing\u00a0the Fed\u2019s latest interest rate hike, Powell warned that \u201cthe labor market remains extremely tight, with the unemployment rate near a 50-year low, job vacancies still very high, and wage growth elevated\u201d.
\nBut aren\u2019t higher wages a\u00a0good thing?
\nThe typical American worker\u2019s wage has been stuck in the mud for four decades.
\nMost of the gains from a more productive economy have been going to the top \u2013 to executives and investors. The richest 10% of Americans now own more than 90% of the value of shares of stock owned by Americans.
\nPowell\u2019s solution to inflation is to clobber workers even further. He\u00a0says\u00a0\u201cthe labor market continues to be out of balance, with demand substantially exceeding the supply of available workers\u201d.
\nBut if the demand for workers exceeds the supply, isn\u2019t the answer to pay workers more?
\nNot according to Powell and the Fed. Their answer is to continue to raise interest rates to slow the economy and put more people out of work, so workers\u00a0can\u2019t\u00a0get higher wages. That way, \u201csupply and demand conditions in the labor market [will] come into better balance over time, easing upward pressures on wages and prices,\u201d\u00a0says\u00a0Powell.
\nPutting people out of work is the Fed\u2019s means of reducing workers\u2019 bargaining power and the \u201cupward pressures on wages and prices\u201d.<\/p>\n