Jobs report: Good is bad.
The jobs report was surprisingly good, with 336,000 new jobs added to the economy.
That worries people.
It is counterintuitive, but good news in the economy frightens people, especially those who want the economy to be good. People are watching "the Fed," the Federal Reserve Bank decision makers who control the money supply and therefore the cost of borrowing money.
In recent memory 10-year treasury yields were nearly zero. People have anchored that zero rate as a before point, an original position, before Biden. Now they are almost 4.79 and they have been on a steady climb.
People notice the level and the trend. Boomers who have accumulated money and are now living off interest may appreciate the change. Safe, liquid money fund investments now pay about 5%. Costs are inflating, but so is income -- a wash. But gasoline prices are in our face. A fill-up of 20 gallons at $5/gallon in Medford, Oregon yesterday afternoon is an even $100. A hundred dollars feels like the purchase of a durable good -- a good toaster, a new kitchen faucet -- not a transitory consumable.
Most Americans are not retired and living off of investments. They are paying interest, not earning it. Some of them are hoping to buy homes. Home prices have stayed high. New homes are hard to site and expensive to build, so new supply is not coming on line in places where the jobs are. The housing crisis of 2008-2012 shrank the construction trades. Contractors went broke. Workers left the industry. Meanwhile, inflation hit the cost of materials. Industry professionals tell me that building residential housing in Southern Oregon would cost me a minimum of $250/square foot, and that is on top of the purchase of a development-ready lot. New housing is nowhere near "affordable" based on local incomes.
For several years -- 2018-2020 -- mortgage rates were in the 3% range. People mentally anchored on that -- the good old days. Now rates are over twice that, hitting 8%. Home buyers face the double whammy: prices stayed high while financing prices grew.
Democrats' fueled the post-Covid recovery with easy money. It worked. The economy surged back. Inflation here is lower than in Europe, but Americans see what they see, higher prices. Democrats get the blame for inflation. Statistics show the overall rate of inflation is down.
A strong labor market means the Fed will likely keep raising rates. The Dow Jones Industrial Average is flat for this year. The SP500 is up 12% but that is entirely due to a half-dozen very large technology stocks. Unless one owned a disproportionate share of those giant companies, one fell behind. If one did, one feels lucky, a bullet dodged. There is not a broad-based stock market "wealth affect" making investors feeling comfortable about their retirement funds. This is another place of distress.
There is a bright spot. Workers, especially entry level and lesser-skilled people, are in demand and can readily find work if they seek it. That mood trickles up, so we see growing demand for pay raises and unionization. Farm owners have to scramble and pay up to get workers who will show up. $25/hour is the new wage paid to get work done in Southern Oregon vineyards.
The strong jobs report is a net good sign for the economy. Fed Chair Jerome Power promised generalized economic "pain" -- his word -- as necessary to end inflation. Instead, we are getting a soft landing. It turns out that some localized points of pain have emerged, and unluckily for the incumbent president, they come in the places people most notice prices and values: gasoline prices, interest rates, the value of their retirement savings, and from the point of view of employers, the price they have to pay to get work done.
Politically, Biden "owns" the economy, and he has labeled it Bidenomics. It reflects on Biden's core point of comparative value: governing competence. If the 2024 election is a referendum on the economy, it will be hard for Biden or any Democrat. But it won't be. Trump insists on being the center of attention, so it will be a referendum on Trump. That is the sweet spot for Democrats.