Geoff Bennett:
We begin tonight with a key economic report that shows U.S. hiring slowing in September. Employers added just 29,000 jobs last month, less than economists had expected. The unemployment rate ticked up to 4.2 percent from 4.1 percent in August. Employment gains in July and August were also revised down by a combined 60,000 jobs.
Amna Nawaz:
The disappointing report has wide-reaching implications for consumer prices and interest rates, and it comes a month before Americans head to the polls for midterm elections.
For more on this, we’re joined now by Beth Hammack, president of the Federal Reserve Bank of Cleveland.
Welcome to the “News Hour.” Thanks for joining us.
Beth Hammack, President, Federal Reserve Bank of Cleveland: Thanks for having me. It’s my pleasure.
Amna Nawaz:
So economists are calling this a low-hire, low-fire labor market. What are your biggest takeaways from today’s report?
Beth Hammack:
I don’t make too much of any one individual report.
There tends to be a lot of variability in the month-by-month numbers that come out from the payroll statistics. On average, what we have seen over the past 12 months is 41,000 new jobs being created each month. That’s largely in line with my estimate of what the break-even is, which was borne out by the fact that the unemployment rate, which I think is the single best measure of the health of the labor market, has continued to be stable at a low number.
Now, I recognize, if you’re a person who’s suffering from that, who’s been put out of work, that feels incredibly painful, and we’re very attuned to that. But this number has been very stable and low around my estimate of maximum employment for the past year.
Amna Nawaz:
Well, to your point of it depends on who you are, looking at this, some are saying that it is who you are in the labor market that matters more than usual right now.
Do you have any concerns about the economy being too dependent on certain specific sectors, things like health and social services, for job growth?
Beth Hammack:
We’re seeing the job growth has been broadening out. Health is certainly a big sector in the economy, and it’s one that’s been growing as our population has been aging, and so we have been expecting that we would see new jobs coming there.
But we’re seeing jobs being created in other segments as well. When I think about our dual mandate and I think about both sides, I give us a pretty good mark on our maximum employment side of our mandate. And where my concern is really is on the inflation side.
We have been missing on our inflation mandate for more than 5.5 years, and it’s really important that we’re able to bring inflation back down to our 2 percent objective.
Amna Nawaz:
Wage growth is also catching some folks’ attention. It slipped to its lowest annual level since May of 2021. I believe it’s below the current rate of inflation.
So what does that lagging wage growth mean for consumers, for the average American in the face of high inflation?
Beth Hammack:
Yes, what I hear when I’m out in the district talking with individuals is how difficult it’s been, when wages have not been keeping up with inflation and the price of goods.
What that means is that these individuals — I did a roundtable yesterday in Northeast Ohio talking with a variety of people from different low- and moderate-income professions. And what I heard from them is that six months ago it had been that they were trading down from steak to ground beef to beans and pasta.
Now they’re not trading down anymore. They’re choosing which bills they’re paying. Are we going to feed — put food on the table tonight? Are we going to fill the gas tank? Are we going to pay the rent? People are juggling now. They’re relying on credit a bit more than they had.
And this has been particularly acute for people at that lower end of the income spectrum, particularly because wages have not kept up with the inflation.
Amna Nawaz:
Yes, tell us more about what you’re seeing in your region because the Cleveland Fed serves a very diverse midsection of the country. You have got major cities like Pittsburgh, more rural areas like Appalachia.
You mentioned what people are saying at the individual level. What about businesses and their hiring practices? Are you seeing slowdowns in specific sectors to you?
Beth Hammack:
I’m actually hearing that businesses are having a shortage of finding workers, particularly in the skilled trades.
There’s been a lot of growth in data centers and construction generally across the region. The Fourth District is all of Ohio, Western Pennsylvania, Eastern Kentucky, and just a small part of West Virginia. And in those areas, what I find is that it’s been very difficult to find workers.
Given the growth that we have seen that’s really driving the demand side, coming from the demand side of the economy in the data center build-out, we find that there are workers like electricians that are really hard to come by. And it might be because they need an electrician for a data center.
But if you’re looking to build housing, whether that’s affordable housing or just residential housing, those electricians are needed for those projects as well. And so the fact that there’s — it’s more costly to bring on those particular skilled trades has made prices generally rising across the board.
Amna Nawaz:
As you likely saw, the stock market did rally today, as investors seem to be betting that this jobs report is going to give you and your colleagues at the Fed enough reason to hold interest rates steady when you meet again later this month.
How have these numbers impacted your thinking on this?
Beth Hammack:
I take really a lot of — I take more signal from the trends than from any individual data point.
And so I try to look at the pathways of where we’re headed and take on board all the information as it comes in. We will still have a lot of information before our meeting at the end of the month. And so there’s a lot of time to make a decision about what the right stance of policy is to make sure we’re delivering on both sides of our mandate.
Amna Nawaz:
Before I let you go, I want to ask you about something you said recently in a concern about persistently high inflation and that Americans could become conditioned to it, to accept elevated prices as the new norm.
What did you mean by that? And what’s the risk in that?
Beth Hammack:
So — but that’s what I’m calling an inflationary mindset. That’s where individuals and businesses become more accepting, more tolerant of inflation. They accept it as a fact of life and they don’t push back against it.
What that means is, what I heard from a business owner in the southern part of our district, a retailer, who said that they have had so many different supply shocks that have been increasing their prices time after time after time, that instead of just raising prices by the amount of what their input costs are going up, they’re raising it by a little extra because they know there will be some more inflation coming.
They just don’t know from where and they want to maintain their margins. That’s what I mean by an inflationary mindset, where people start accepting these types of persistently higher increases and higher levels of inflation over time.
And when that happens, it can be much more difficult for monetary policy to bring down inflation itself because of those expectations. And that’s why we talk about wanting to make sure that inflation expectations stay well-anchored, which they have been. They have been anchored right around our 2 percent objective.
But that’s a really important piece of our work, is making sure that we both get inflation down and we keep inflation expectations right around our objective.
Amna Nawaz:
All right, that is Beth Hammack, president of the Federal Reserve Bank of Cleveland, joining us tonight.
Thank you so much for your time.
Beth Hammack:
Thank you.