"Federal Reserve mouthpiece": Low employment growth may become the new normal, but it is especially fragile in the context of war

Deep Tide TechFlow message, April 04, “the Federal Reserve’s megaphone” Nick Timiraos wrote that March added 178k jobs, reversing the sharp drop in February. The unemployment rate also fell to 4.3%. But some details are not quite optimistic: wage growth for ordinary workers slowed to the lowest year-over-year pace in the five years since the post-pandemic recovery. Averaging these two more volatile months provides a clearer view of the underlying trend: the monthly average adds only 22.5k jobs. Two years ago, adding 22.5k jobs per month was enough to raise concerns; and today, that level may still be seen as acceptable.

Federal Reserve officials are still working to explain this shift. San Francisco Fed President Daly wrote on Friday, “Helping the public understand that an economy with zero job growth is still consistent with full employment is not easy.” With fresh supply shocks coming again, this situation is especially fragile. If the Iran war continues, high fuel costs or shortages of goods could squeeze businesses and consumers, leaving the labor market without a buffer to absorb the shock. At the same time, because inflation concerns may weaken the certainty of rate cuts, the Fed’s policy room is even more limited. (Jin 10)