The U.S. unemployment rate fell to a 50-year low in December, the surest sign of economic recovery from the debilitating effects of the Covid-19 pandemic and, more recently, a surge in global oil prices fueled by the Ukraine war. But inflation remains a stubborn problem.
U.S. President Joe Biden understands this, and he reminded the country on Friday when he celebrated the new jobs report.
“Today’s report is great news for our economy and more evidence that my economic plan is working. The unemployment rate is the lowest it has been in 50 years. We just completed two of the strongest years of job growth in history. The steady, steady growth I’ve been talking about for months,” he said.
But, Biden warned: “We still have work to do to bring down inflation and help American families cope with the cost of living. But we’re moving in the right direction.”
According to the latest Labor Department estimates, inflation was 7.1 percent in the 12 months ending in November; A new calculation is expected at the end of January.
The U.S. Fed’s intervention began last June when inflation rose 0.75 percent, the highest since 1994, to a 40-year high of 8.6 percent. There will be six more increases over the next few months. of various sizes, the latest being half a percent in December.
The purpose of these increases is to curb costs by making credit more expensive. But there are stocks that can limit production—if consumers don’t buy, companies won’t have much to sell and cut production—and slow the economy, leading to a recession.
The Fed is set to announce its next interest rate hike after the January 31-February 1 meeting of its top decision-making body. But there are indications the increases could be smaller, in the quarter-percentage-point range, according to minutes of the agency’s December meeting released this week.
“Most participants emphasized the importance of maintaining flexibility and discretion while shifting policy to a more restrictive stance,” the minutes said, indicating Fed officials were willing to cut rates.
But the departures will continue. “Participants reaffirmed their strong commitment to returning inflation to the (Federal Open Market) Committee’s 2 percent target,” the minutes said. “A number of participants emphasized the importance of making clear that the slowdown in the pace of interest rate increases does not signal a weakening of the Committee’s determination to achieve its price stability objective.”
The Biden administration has also dealt a blow to inflation — through the ambitious $370 billion Inflation Relief Act, which seeks to reduce the deficit through higher taxes on the super-rich, extend health care benefits, lower the prices of certain prescription drugs and make a historic investment in cleanup. energy.
Meanwhile, the real fight over inflation continues at gas pumps and grocery stores. Despite several releases from US strategic stockpiles by order of President Biden, gas prices continue to rise and fall with the Ukraine war.
A direct result of the economic uncertainties — not just related to inflation — have been major layoffs in the tech sector, starting with Facebook and Twitter in November. More than 125,000 tech workers laid off in 2022. And it continues — Amazon announced on Thursday that it was laying off 18,000 workers, its biggest layoff ever, and a day after online clothing company Stitch Fix laid off 20 percent of its employees and cryptocurrency lender Genesis said it plans to cut 30 percent.
These tech companies hired aggressively during the Covid-19 pandemic as online usage peaked as people worked, read, shopped and played remotely from home. The return to normalcy has left these companies with over-bloated staffs, which have become increasingly unsustainable – raising fears of a further economic downturn.
Among them are many Indian H-1B visa holders. The layoff was traumatic for them because if they could not find another employer within 60 days, it meant the end of their stay in the United States. For those in line for Green Card — permanent U.S. residency — the U.S. has long faced the most devastating situation, their children born and raised here recognize no country as home.
They have a fairer chance of finding alternative employment in an improving job market, as reflected in record unemployment figures. Industry experts predict better career options for tech professionals in non-tech companies, such as the healthcare and hospitality sectors.