Since Trump took office, he has deported a considerable number of immigrants, and the labor lost due to these deportations can be considered permanently gone. Moreover, some immigrants used to work two to three jobs
Not to mention that with Trump imposing one tariff today and another tomorrow, this clearly creates enormous uncertainty for businesses. In such a situation, companies are more likely to wait and see rather than hire.
If nonfarm payrolls cannot strip out the gaps caused by these structural and political issues, any economic decisions based on them will be highly distorted.
A rate cut can’t fix Trump harassing other countries and businesses like a meddling clown.
No, a rate cut can’t make those permanently lost immigrants contribute to employment data again.
The Federal Reserve should focus on things that monetary policy can directly influence.
Instead of being dragged into trouble by Trump everywhere and ending up having to shoulder the blame for recession and inflation.
Is nonfarm payroll really an appropriate indicator for assessing whether employment needs a rate cut to stimulate it?
byu/AppropriateRefuse590 instocks
Posted by AppropriateRefuse590
2 Comments
Not really stocks discussion, but sure.
Nonfarm payrolls have been a bit of a joke for a while. Ever since Reagan, the only thing economists have cared about is the number of jobs being created, not if they’re actually, you know, good jobs. This happened in the back half of Biden’s presidency, when there were a bunch of white collar layoffs and the jobs that were waiting for them were health care, government jobs, and Wendy’s.
I think right now, unemployment is also getting tricked by Uber and Only Fans. A lot of people these days, when they get fired or quit, don’t do unemployment because it’s exhausting and difficult, so they just do Youtube or OF or Uber(or insert your rideshare here) so they’re hidden from unemployment roles even though they’re stuck in a bad employment situation. And of course, unemployment doesn’t count people who can’t find a job or have stopped looking.
But as for the rate cut…yeah, we’re looking more and more destined for stagflation-town. The problem companies are having is not that they need looser borrowing costs, but that there’s a lot of uncertainty and frankly, a lot of places have just been quietly getting rid of white collar jobs and never replacing them with anything. And while the interest rate on a mortgage matters, it matters a lot less than that the price of a home or apartment has like, doubled in the last four years. So there’s a decent chance that a rate cut does literally nothing and just aggravates inflation.
What’d really worry me is if they cut rates and then borrowing rates on everything else didn’t respond, like what happened to mortgage rates after the jumbo cut at the middle/end of 2024.
You’re correct that economic uncertainty causes employers to pull back on hiring, however that’s not a distortion of the fact but more along the lines of, the fact.
Nonfarm payroll is not an indicator of job loss through deportation but rather hiring activities. If nonfarm payroll isn’t going up, it doesn’t just mean industries aren’t growing, but also that they aren’t rehiring any presumed job losses. Adding in tariff uncertainty dragging down consumer spend and investment in business expansion, the jobs numbers look bleaker with deportations not better.
In the end it comes down to the fed needing to weigh inflation vs jobs, and the most recent speech and jobs numbers has them suggesting controlling jobs is more important than inflation. In a way it makes sense, if people are employed but can afford less, it’s not quite as bad as being unemployed and affording nothing. However I do think they may be overestimating, again, how transitory inflation from tariffs is, personally.