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The Morning Dispatch: A Jobs Report from the Goldilocks Zone
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The Morning Dispatch: A Jobs Report from the Goldilocks Zone

Job growth remains strong, although lingering fears remain that the Fed will overcorrect in fighting inflation.

Happy Monday! Declan’s out of the office for a couple days, which makes this as good a time as any to note that the Cardinals took 3 of 4 from the Cubs over the weekend. Let’s get on to the news.

Quick Hits: Today’s Top Stories

  • The baby formula plant whose February shutdown exacerbated a nationwide formula shortage resumed production over the weekend. “We will ramp production as quickly as we can while meeting all requirements,” Abbott Nutrition said in a Saturday statement.

  • Dr. Mehmet Oz secured his victory in Pennsylvania’s Republican Senate primary Friday after former hedge fund CEO David McCormick, who trailed Oz by less than 1,000 votes in the initial vote count, conceded that an in-progress recount would not eliminate that margin.

  • John Fetterman—Pennsylvania’s lieutenant governor and Oz’s November opponent—is facing new questions about his health going into the general election, following a stroke last month that required hospitalization and the installation of a pacemaker. In a Friday statement, Fetterman, a Democrat, revealed he suffered from a heart condition and had “avoided going to the doctor,” and as a result he “almost died.”

  • Republicans and Democrats in the Senate say they’re making progress on gun legislation following a rash of mass shootings in recent weeks, although Sen. Pat Toomey said on Face the Nation Sunday that the discussions do not “guarantee any outcome.” The Washington Post reports that such legislation would potentially include encouraging states to implement red-flag laws that would allow courts to bar people thought to be a threat to themselves or others from accessing firearms.

  • Three people were killed and 11 more injured in a shooting in Philadelphia’s South Street nightlife corridor Saturday night. Police said two men got into a fight, then both produced guns and began firing at each other on the crowded street. One of the two shooters was killed in the initial confrontation; the other was wounded and fled the scene.

  • Former Trump adviser Peter Navarro was arrested on two misdemeanor charges of contempt of Congress Friday after Navarro refused to testify before or supply documents to the committee investigating the Capitol riot on January 6, 2021. Another former Trump associate, Steve Bannon, is scheduled to go on trial for comparable charges next month.

  • An attack on a Catholic church in southwest Nigeria has left more than 50 people feared dead, including many children, authorities said Sunday. It was not immediately clear who was behind the attack, which involved both firearms and explosives. 

A Jobs Report from the Goldilocks Zone

(Photo by Culture Club / Getty Images.)

Once upon a time, there was a little girl named Goldilocks who really should’ve been booked for home invasion. Instead, she wound up granting her name to anything that’s “just right”—such as May’s job report.

We know that joke’s a stretch, but we’re running out of new ways to introduce solid jobs reports like the one the Labor Department released Friday. After nearly a year of the pandemic rebound with at least 400,000 new jobs per month, in May employers added 390,000 jobs—hardly cold, but not quite white-hot. Economists surveyed by Bloomberg had predicted a slower uptick of 318,000 new jobs.

We’re still about 822,000 jobs short of pre-pandemic levels, but the gap could close by the end of summer. Meanwhile, labor force participation edged up 0.1 percent to 62.3 percent in May, still 1.1 percent below February 2020.

Unemployment stayed at its near fifty-year low of 3.6 percent, and there are still nearly two open jobs for every one job-seeker. Coupled with high inflation, that ridiculously tight labor market has driven strong wage growth in recent months, causing economists to fret rising wages would in turn force businesses to increase prices, creating a wage-price spiral. 

But average hourly wages for private, non-farm employees rose 0.3 percent in May from the previous month, a smidge shy of the 0.4 percent economists expected. And the three-month average of year-over-year wage growth hit 4.6 percent—about 1.7 percent above the pre-pandemic average but well below the peak of 7 percent in mid-2021, according to the nonpartisan Peterson Institute for International Economics.

That’s a lot of numbers just to say: Employers are still raising pay to attract workers, but they’ve chilled out a bit. “Firms seem to be less willing to raise wages sharply in order to fill openings than they were last winter,” as Peterson analysts put it. That’s not pleasant for the individual worker looking for a boost to the old paycheck, but it’s a good sign that the economy overall remains robust but not berserk. Meanwhile, as we’ve written previously, inflation seems to have peaked, at least for now.

All in all, a solid jobs report—but the markets reacted like they’d been served a bowl of chilly, lumpy porridge. The S&P 500 dropped 1.7 percent Friday after the report’s release, while the Dow Jones Industrial average fell 1 percent and the tech-heavy Nasdaq Composite outdid them both by losing 2.6 percent. Meanwhile, Tesla owner and maybe someday Twitter owner Elon Musk declared he has a “super bad feeling” about the economy and needs to cut 10 percent of Tesla’s staff, Reuters reported.

We’re not sure what to tell you about Musk’s super bad feeling, but the market’s overall reaction is a perverse sign of the job report’s strength. “The economy’s doing quite well,” Brendan Walsh, co-founder of Markets Policy Partners, told The Dispatch. “The worry is that because the economy is doing well, the [Federal Reserve] will over-tighten and drive us into recession.”

In a bid to bring down inflation by taking its foot off the economy’s gas pedal, the central bank has already hiked interest rates twice this year, making loans to buy homes or expand businesses more expensive, discouraging demand. It’s signaling it plans a couple more hikes before September, and Fed vice chair Lael Brainard said Thursday the central bank would check its plan against the jobs report (among other markers). “We’ll be looking closely to the data to see that kind of cooling in demand, and moderation—better balance—in the labor market,” Brainard told CNBC. “With our number one challenge being the need to get inflation down, we do expect to see some cooling of a very, very strong economy over time.” The solid jobs report is another indicator that the economy can handle the Fed’s cooling measures.

In remarks trumpeting the report, President Joe Biden said it was an indicator that the economy can handle the Fed’s cooling measures. “As we move to a new period of stable, steady growth, we should expect to see more moderation,” Biden told reporters Friday. “We aren’t likely to see the kind of blockbuster job reports month after month like we had over this past year, but that’s a good thing. … That stability puts us in a strong position to tackle what is clearly a problem: inflation.” 

Which returns us to the market worry that after letting inflation shoot up the Fed will overcorrect and strangle U.S. economic growth into a recession. “Right now, it’s kind of sunny, things are doing fine,” JPMorgan Chase head Jamie Dimon warned Tuesday at an investors’ conference, arguing that the combination of pandemic stimulus, Fed policy, and the war in Ukraine are bearing down on the economy. “Everyone thinks the Fed can handle this. That hurricane is right out there, down the road, coming our way. We just don’t know if it’s a minor one or superstorm Sandy.”

But at least for the next few months, Walsh is sanguine. “The economy is too strong,” he said. “The risk is much more [for] 2023, that the Fed does over-tighten, we come off of this COVID rebound.” But, he predicted, “It’s a bit of a lull. It’s not like a crisis.” 

So… a lukewarm economic porridge? We’ll see ourselves out.

Worth Your Time

  • So-called red-flag laws have emerged as a rare point of possible bipartisan agreement on gun issues in recent years, particularly following the crush of shootings this Spring. But they’ve also been criticized as a potentially spotty countermeasure, with several prominent mass shooters in states with red-flag laws having been able to obtain firearms despite making public threats of violence ahead of time. A New York Times feature over the weekend examines one county that has taken its red-flag ordinance seriously: Suffolk County in New York, where more than 160 guns have been removed by court order since 2019. “The filings are filled with people threatening to shoot up courthouses or schoolhouses, amped-up men in cars with weapons and ammunition, people behaving erratically at a gun shop or military-base checkpoint or firing randomly into a neighbor’s yard,” the reporters write. “People who text friends and loved ones ‘Goodbye forever’ or ‘I have a gun next to my bed bro’ or post, ‘When I kill everyone know it’s my dad’s fault.’”

  • Speaking of the Times, Maggie Haberman’s latest contains remarkable new reporting about former Vice President Mike Pence’s experience of the January 6 riot: “The day before a mob of President Donald J. Trump’s supporters stormed the Capitol … Vice President Mike Pence’s chief of staff called Mr. Pence’s lead Secret Service agent to his West Wing office. The chief of staff, Marc Short, had a message for the agent, Tim Giebels: The president was going to turn publicly against the vice president, and there could be a security risk to Mr. Pence because of it.” Haberman goes on to detail the remarkable pressure Pence was put under by a rogue’s gallery of Trump supporters in the days leading up to his Jan. 6 decision not to obey Trump’s command to interfere with the counting of the electoral vote: “At the end of December, Mr. Pence traveled to Vail, Colo., for a family vacation. While he was there, his aides received a request for him to meet with Sidney Powell, a lawyer who promoted some of the more far-fetched conspiracy theories about flaws in voting machines, and whom Mr. Trump wanted to bring into the White House, ostensibly to investigate his false claims of widespread voter fraud.”

Presented Without Comment

Also Presented Without Comment

Toeing the Company Line

  • In his Sunday French Press, David draws a distinction between the healthy safety- and rights-focused gun culture that America has long enjoyed and the reactionary gun fetishism that has grown more ubiquitous in recent years. “The gun fetish rears its head when politicians pose with AR-15s in their campaign posters, or when a powerful senator makes ‘machine-gun bacon’ to demonstrate just how much he loves the Second Amendment,” he writes. “Spend much time at gun shows or at gun shops, and you’ll quickly become familiar with something called the ‘tactical’ or ‘black gun’ lifestyle, where civilians intentionally equip themselves in gear designed for the ‘daily gunfight.’ It’s often a form of elaborate special forces cosplay, except the weapons (and sometimes the body armor) are very real.”

  • In his Friday G-File, Jonah took aim at “the most fatal flaw of Democrats”: “that they take it as a given that government can do the normal stuff well.” “If progressives really wanted to restore faith in government, they’d concentrate all of their energies on tackling the stuff already on the government’s plate,” he writes. “Execute the job you’ve been given well, and then we’ll talk about giving you more responsibility. Walk, then run, and then we’ll get into a fun argument about whether it’s stupid you think you can fly.”

  • Don’t forget the podcasts: In Friday’s Remnant, Jonah dove solo into topics ranging from the somber to the downright bizarre: television, republicanism, superstition, and the like. In this week’s Good Faith, David and Curtis discuss the tensions between gun rights and gun control and the hyper-polarization that engulfs the issue. And on the Dispatch Podcast, the gang discusses the first 100 days of war in Ukraine, the gun question, and next week’s January 6 hearings on Capitol Hill.

Let Us Know

When you read the sentence “Republicans and Democrats in the Senate say they’re making progress on gun legislation following a rash of mass shootings in recent weeks,” what color did your mood ring turn?

Andrew Egger is a former associate editor for The Dispatch.

Esther Eaton is a former deputy editor of The Morning Dispatch.