Treasury Secretary Janet Yellen said yesterday that “It’s Fed’s Job to Avoid Any Wage-Price Spiral.” Well, The Fed is helping to avoid a wage increase in real terms, since the November jobs report revealed that REAL US Average Hourly Earnings growth YoY fell to -1.378%. In other words, inflation is greater than hourly earnings.
And in other jobs related news, nonfarm payrolls rose by only 210k versus expectations of 550k jobs to be added. Even NOMINAL hourly earnings growth (4.8% YoY) was less than expected (5.0%).
Labor force participation rose a bit to 61.8%, still well below the pre-COVID levels of 63.4% in January 2020.
The U-3 unemployment fell to 7.8%. Still higher than the pre-COVID rate of 7.0% in February 2020, but getting close! As for what this means for The Fed, the new target rate implied by the Taylor Rule is 15.50%.
After this lousy jobs report, 10-year Treasury yields dropped … like Biden’s approval ratings.
The dance number where The Fed keeps their target rate at 25 basis points while the Taylor Rule implies a target rate of 15.50% is the Yellen Boogie. By Powell and the Gang.
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