Geoff Bennett:
We begin tonight with a key economic report that shows a slowdown in U.S. hiring in September. Employers added just 29,000 jobs last month, fewer than economists expected. The unemployment rate increased to 4.2 percent from 4.1 percent in August. Employment gains in July and August were also revised down by a total of 60,000 jobs.
Amna Nawaz:
This disappointing report has far-reaching implications for consumer prices and interest rates, and it comes a month before Americans go to the polls for the midterm elections.
For more, we’re joined now by Beth Hammack, President of the Federal Reserve Bank of Cleveland.
Welcome to “News Hour”. Thank you for joining us.
Beth Hammack, President, Federal Reserve Bank of Cleveland: Thank you for inviting me. It’s my pleasure.
Amna Nawaz:
Economists therefore speak of a labor market with low hiring and low firing. What are your main takeaways from today’s report?
Beth Hammack:
I don’t give too much importance to an individual report.
There is usually a lot of variability in the monthly figures that emerge from payroll statistics. On average, over the last 12 months, 41,000 new jobs were created each month. This is largely in line with my estimate of the break-even point, which was confirmed by the fact that the unemployment rate, which is in my opinion the best measure of the health of the labor market, has remained stable at a low level.
Now, I recognize that if you are a person who is suffering from this, who has been made unemployed, this is incredibly painful, and we are very sensitive to it. But this number has remained very stable and low around my estimate of peak employment for the past year.
Amna Nawaz:
Well, that depends on who you are. Looking at this, some say it’s who you are in the job market that matters more than usual right now.
Are you concerned that the economy is too dependent on specific sectors, such as health and social services, for job growth?
Beth Hammack:
We see that job growth has broadened. Healthcare is certainly an important sector in the economy, and it’s a sector that is growing as our population ages, and so we expected to see new jobs appear in this sector.
But we are also seeing job creation in other segments. When I think about our dual mandate and both sides, I give us a pretty good rating on the maximum employment part of our mandate. And what really concerns me is on the inflation side.
We have not met our inflation mandate for over 5.5 years, and it is really important that we are able to bring inflation back to our 2% target.
Amna Nawaz:
Wage growth is also attracting the attention of some. It fell to its lowest annual level since May 2021. I believe it is below the current inflation rate.
So what does this slow wage growth mean for consumers, for the average American in the face of high inflation?
Beth Hammack:
Yes, what I hear when I speak with individuals in the district is how difficult it has been, when wages have not kept up with inflation and the price of goods.
What that means is that these people… I hosted a roundtable yesterday in Northeast Ohio, talking with a variety of people from different low- and moderate-income professions. And what I heard was that six months ago they were moving from steak to ground beef to beans to pasta.
Now they are no longer falling. They choose which bills they pay. Will we feed – put food on the table tonight? Are we going to fill up with gas? Are we going to pay the rent? People are juggling now. They rely a little more on credit than before.
And it has been particularly bad for people at the lower end of the income scale, not least because wages have not kept pace with inflation.
Amna Nawaz:
Yes, tell us more about what you’re seeing in your area, because the Cleveland Fed serves a very diverse middle section of the country. You have big cities like Pittsburgh, and more rural areas like Appalachia.
You mentioned what people are saying on an individual level. What about companies and their recruiting practices? Are you seeing slowdowns in specific sectors?
Beth Hammack:
In fact, I hear that businesses are short of workers, particularly in skilled trades.
There has been strong growth in data centers and construction in general in the region. The Fourth District covers all of Ohio, western Pennsylvania, eastern Kentucky, and only a small part of West Virginia. And in these areas, what I find is that it has been very difficult to find workers.
Given the growth that we’ve seen that’s really driving demand, coming from the demand side of the economy in data center construction, we’re seeing that there are workers like electricians that are very hard to find. And maybe it’s because they need an electrician for a data center.
But if you are planning to build housing, whether it is affordable housing or just residential housing, these electricians are also needed for these projects. And so the fact that it’s more expensive to use these particular specialty trades has driven up prices across the board across the board.
Amna Nawaz:
As you probably noticed, the stock market actually rallied today as investors seem to be betting that this jobs report is going to give you and your colleagues at the Fed enough reason to keep interest rates steady at your next meeting later this month.
How have these figures influenced your thinking on this subject?
Beth Hammack:
I really take a lot – I get more signals from trends than from any individual data point.
So I’m trying to look at where we’re going and take in all the information as it comes in. We will have a lot more information before our meeting at the end of the month. So we have plenty of time to decide what the right policy position is to ensure that we deliver on both parts of our mandate.
Amna Nawaz:
Before I let you go, I want to ask you about something you said recently regarding your concern about persistently high inflation and that Americans may be conditioned to it and accept high prices as the new normal.
What did you mean by that? And what is the risk in that?
Beth Hammack:
So, but that’s what I call an inflationary mentality. This is where individuals and businesses become more tolerant and tolerant of inflation. They accept it as a fact of life and do not oppose it.
What that means is what I heard from a business owner in the southern part of our district, a retailer, who said that he’s had so many different supply shocks that have caused his prices to go up time and time again, that instead of just raising prices based on the increase in their input costs, they’re raising it a little bit more because they know there’s going to be even more inflation coming.
They just don’t know where they’re coming from and want to maintain their margins. That’s what I mean by an inflationary mentality, where people start to accept these kinds of consistently higher increases and higher levels of inflation over time.
And when that happens, it can be much harder for monetary policy to bring down inflation itself because of those expectations. And that’s why we talk about wanting to make sure that inflation expectations remain well anchored, which they have. They were anchored around our 2 percent goal.
But it’s a very important part of our job: making sure that we reduce inflation and keep inflation expectations around our target.
Amna Nawaz:
All right, joining us this evening is Beth Hammack, President of the Federal Reserve Bank of Cleveland.
Thank you very much for your time.
Beth Hammack:
THANKS.
Gn headline
