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

BlockBeats message, April 4: “Federal Reserve mouthpiece” Nick Timiraos wrote that March added 178k jobs, reversing the sharp downturn in February. The unemployment rate also fell to 4.3%. But some details are not so encouraging—the growth in wages for ordinary workers slowed to the lowest year-over-year pace in the five years since the post-pandemic recovery. Averaging these two months with large fluctuations gives a clearer view of the underlying trend: the monthly average added jobs are only 22.5k. Two years ago, adding 22.5k jobs per month was enough to raise alarm; but now, this level may still be seen as acceptable. Federal Reserve officials are still working to explain this change.

On Friday, San Francisco Fed President Daly wrote, “Helping the public understand that an economy with zero job growth can still be consistent with full employment is not easy.” In the face of fresh supply shocks, this situation is especially fragile. If the war in Iran continues, high fuel costs or shortages of commodities could squeeze businesses and consumers, leaving the labor market without a buffer to absorb the shock. Meanwhile, with inflation concerns potentially weakening the certainty of rate cuts, the Fed’s policy room is even more limited.