Rex Nutting: Bigger paychecks are good news for America’s working families. Why does it freak out the Fed?

by | Dec 2, 2022 | Stock Market

The biggest takeaway from Friday’s jobs report is that the Federal Reserve is going to freak out because average hourly wages went up 18 cents in November and 46 cents since August. Breaking news: U.S. adds 263,000 jobs in November and wages rise sharply—far too much for the Fed’s liking

It’s heartbreaking, because what should be treated as good news — bigger paychecks for struggling American families — will instead lead to more misery for those families as the Fed tightens the screws on the economy in the false belief that the economy’s biggest problem is that Americans have too much money. Economists’ reactions: November jobs report is most important data for inflation this year, and not in a good way You see, what sounds like good news to you and me and every working person is bad news to the Fed — and to the financial markets


that were counting on a quick return to the lower interest rates they are addicted to.

WSJ’s Dion Rabouin explains why there will be a bigger wave of layoffs. Illustration: Elizabeth Smelov

Dashed hopes for a ‘pivot’ Those hopes were dashed by the wage figures in the November jobs report. The Fed is now likely to boost interest rates
even higher in coming months, starting with another big hike in the federal funds rate
during its Dec. 12-13 meeting. Fed Watch: U.S. jobs data puts jumbo interest rate hike back on table at Fed’s December meeting

See that little uptick at the far right? That’s what’s freaking out the Federal Reserve.


It’s madness. Typical American families don’t have too much money, but they are paying the price for the inflation that’s eroding their paychecks and their meager wealth. In real terms, the average paycheck has no more purchasing power today than it did in February 2020 when the pandemic was getting ready to clobber the economy. The employment cost index (ECI), which economists say is the best measurement of compensation, shows working families are no better off than they were in 2014.

The employment cost index confirms that compensation has fallen behind inflation.


Whatever gains workers have made in their paychecks have been eaten up by the higher prices …

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