Too little, too much or just right?

People are sure that Powell cut too late and too early and too much and not enough

Random Walk is at a conference this week, so notes will be shorter and lighter.

• ‘good job, Chairman, the labor market needed shoring’

• ‘stupid Chairman, no shoring is needed, you’re just going to overheat’

• ‘good god, Chairman, it’s too little, too late…what have you done?’

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Powell is overheating asleep at the wheel just fine one cool cat

Random Walk is on a plane with bad internet and very tired, but consistency beckons, and puzzlement is afoot.

Labor market needed shoring, and shoring is good

The Fed cut rates to shore up a softening labor market.

It’s a sensible thing insofar as demand for new hires has slowed considerably, and unemployment has crept up.

This is well covered territory around these parts, but still, I am pleased to observe something new about this phenomenon:

BofA

Job openings are basically back to pre-pandemic levels, but the reversion is driven almost entirely by smaller firms (that also drove the growth).

I don’t think ever fully appreciated how much of the pandemic hiring blitz was the doings of 10-49 and 50-249 person companies. It makes sense, insofar as SMBs are ~60% of the labor force generally, but it’s just neat to see.

In any event, that blitz is most definitely over, and in some cases, job openings are lower than before.

So, good move Fed. Staunch the bleeding. Let the hiring spree begin!

What we need is a lot more jobs than people available to fill them

At the same time, cutting rates to shore up a softening labor market is a somewhat dubious thing to do, as well.

It’s true that job openings have slowed, but it’s not like people are getting fired, and having way too many job openings relative to the amount of people able to fill those jobs is what ripped inflation to the moon (among other things, but mainly that).¹

Since we do not have that many more people than before, it’s unclear what good it does to have many more jobs to fill.

That seems like a rake best not to step on twice.

And yet.

Wouldn’t you know it, wage growth already appears to be accelerating, even without cuts—and not just in the usual places: