On Thursday, Powell described the job market as “extremely, historically” tight and “unsustainably hot.” Available jobs are near record highs.
But Powell is also betting that that very strength will give the Fed an unusual opportunity to cool the economy and fight inflation without derailing the job market or causing a recession.
For employers, though, all those openings are a source of continuing frustration because a worker shortage has made them hard to fill.
As Powell and the Fed see it, the surge in job postings forces employers to boost wages to attract and keep workers.
But this time, with so many open jobs, the Powell Fed is figuring that most employers will respond by cutting back on job postings, rather than laying off people.
In his remarks Thursday, Powell pointed to a key figure underlying the Fed’s approach: There are about 5 million more jobs — including both filled and unfilled — than there are unemployed people to fill them.
Last month, the central bank raised its benchmark short-term rate for the first time in more than three years, by a modest quarter-point, to a range of 0.25% to 0.5%.
The Fed’s moves have already contributed to higher borrowing costs for home mortgages, auto loans and credit cards.
For now, average hourly wages are rising at about a 5.5% annual pace, the sharpest pace in four decades.
The Fed’s preferred measure of inflation is at 6.4%, partly because of supply shocks that have sharply raised the cost of gas, food, autos and many other goods and components.
With workers switching jobs in record numbers, Sahm said some companies are likely posting extra openings to build “an inventory of workers” to ensure that they can meet customer demand.
Goldman Sachs has calculated that the gap between total jobs, including openings, and workers, would need to fall by half — or 2.5 million — to slow wage increases and inflation.
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