Douglas Holtz-Eakin: Moderation in wage growth is ‘good news story’ for the Fed

and the final jobs report before the State of the Union much better than anyone expected blue jobs

growth

past predictions with 517,000 jobs added that's almost triple expectations the unemployment rate fell to 3.4 percent, the lowest in half a century when Richard Nixon was president Biden today calls it a great victory this is where we find ourselves the greatest job

growth

in hi

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the lowest unemployment rate in 54 years manufacturing is recovering and at a faster rate than in recent 40 years inflation goes down real careers real

wage

s go up but they go up moderately they are not going through the roof the economy is growing at a solid pace in a nutshell I would say Biden's economic plan is working but a positive report on growth employment makes the Fed's job fighting inflation even more difficult since core inflation still isn't going down, so let's go straight to CNBC's senior economists. reporter Steve Lisman and Douglas Holtz Eakin, president of the American Action Forum, former chief economist of the President's Council of Economic Advisers, as well as former director of the Congressional Budget Office, so Steve, these job gains are in all areas of the labor market, a key to knowing how much Furthermore, the FED needs to raise interest rates and that would certainly indicate Chairman Powell on Wednesday that they have not done so, contrary to what some people in the markets may have thought .

Yes the market thinks the FED should pull back and in fact it has rate cuts built in for the end of the year that's here Jay Powell told him don't get too married to that forecast because you don't see it happening partly because he wanted see that this is before the number. came out this Wednesday I wanted to see the labor market weaken a little bit uh create some slack in the labor market so that we wouldn't have these sharply increasing

wage

s that would impact inflation in fact, what happened, you said it well, Andrea, this is a broad-based on earnings in jobs, I can't seem to find anything in particular, I exaggerated that, sometimes we get a peculiar number and it's a matter of seasonal adjustment or not, but it's widespread and another thing worth pointing out , we were a little sure. that the labor market was weakening in December, the work week had received less temporary help, which is a leading indicator that jobs were down, almost all of those things reversed this month, so it seems that we are back in the race for strong hiring and the The FED will probably have to lean on that a little bit and they just gave a quarter point to Douglas Holtzeek and you worked in a Republican White House and of course on the bipartisan congressional budget committee , but how can you lower core inflation when the labor market is that strong and you know he's Jerome Powell aiming for two percent inflation, yeah, and he's not going to get there this year, this is a fight long, long, so the first thing I would say is that I think Steve is right.

There is a lot of extravagance in these figures. I would take this report seriously, but not literally. These figures are too simple. They could be readjusted within a month, but the most important feature is that we got very strong job growth in both reports and we didn't. I don't see a big acceleration in wages wages wage growth continued to moderate a little bit Chairman Powell has linked wages to inflation in the service sector which is our problem right now so that's

good

news

since the Fed's view: strong growth, not strong inflation. pressures the proof will be in the pudding, you know, on Valentine's Day we will get the consumer price index, it will be a lovely moment, we will be able to see if the price pressures are really easy, so Steve Lisbon will see you on Valentine's Day Valentine, if this is something. we could love and yes we can send a valentine to Jay Powell, but from your perspective, now you know what the next step is because the soft landing was always going to be difficult to achieve, how few there have been in hi

story

, but now, what means? he's not really any closer yeah I mean first of all I have to say I actually take my friend Doug Holtaken uh seriously and literally um and I would just like to point out that right now what we have is we have a problem that doesn't match.

In the Fed's correct idea, which is what Doug just said, we have wage growth sort of falling even in the midst of this strong labor market, so it may be that the Fed's essential idea that there is This link between the type of labor market and inflation may be wrong. and the answer could be Andrea, we just have to undo those supply chain problems. We had gotten people back to work so they could provide their five supply that was available, maybe even China coming back online might help a little. not be as tied to wages, the other thing worth noting is that much of the job growth is still coming from some of those sectors that are below their pre-pandemic levels, such as leisure and hospitality, were responsible for 128,000 74,000 from the government. education 79,000 nurses and you can't say we have too many nurses in this country so there needs to be legitimate job growth here to get back to where they were and I don't think it's right for the Fed to step in Faced with that and Doug , you ran the CBO and know these relationships better than anyone.

A debt ceiling crisis is looming. There are many things that can ruin any smooth landing. China is one of them. We have seen that today there is an international crisis, no matter what Vladimir Putin does, but the most immediate thing is a crisis of the debt ceiling if it falls off the cliff and a downgrade, another downgrade of American credit, yes, and to be clear , there is no disagreement. I have not heard anyone say that we should not increase or suspend the debt limit, not doing so would be catastrophic. I have heard some members of Congress say that there is a disagreement about the future of the US government's spending patterns.

Fiscal policy is going down an unsustainable path so someone is going to We have to change that direction in At some point, the question is whether this is the time to reach that agreement and whether there is a kind of normal reaction where the President says: let's do it in parallel, there is a budget process, but do you do it? President McCarthy has the flexibility that people in his coalition have given him to make those kinds of commitments, we're going to find out. I mean, there's no doubt about it. You know, the vote put everyone on notice that the margins are tight and this has to stop, so stay tuned.

Thank you very much Steve Leesman and Doug and Doug, thank you both.