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MNI INTERVIEW: Will Take A Lot More To Hurt Jobs -Fed's Lubik


U.S unemployment could rise by less than the full percentage point the FOMC expects in the next year, boosting the chances of a soft landing even as rates head to possible levels over 5%, Federal Reserve Bank of Richmond senior adviser Thomas Lubik said in an interview.

The "exceptionally good" January jobs report, with a stunning 517,000 employees added and the jobless rate sliding to a fresh 50-year low, is just one data point, he told MNI's FedSpeak podcast, "but the upward revisions of employment growth last year contributed to the impression that the labor market is exceptionally strong, and it would take a lot more, I think, to hurt it."

"It's almost operating in its own universe. It seems almost unaffected by whatever else is going on in the economy, which is actually a very good thing."

Moreover, wages growth is cooling, which should help moderate core services inflation over coming months.

"When the Fed started on its hiking path, I would have been leaning much more toward not seeing a soft landing because the employment situation almost seemed too good," Lubik said. "Given how the data have come in, I would have to revise this opinion."

"A soft landing, meaning inflation trending down persistently and steadily toward the 2% target without much effect on the unemployment rate, seems to be in the realm of possibility."


Markets marked up expectations for rate hikes after last week's jobs data, with some analysts pushing back the timing of cuts until next year, while Fed officials promised to lift rates higher than the 5%-5.25% December projection if data continue to strengthen.

"It remains to be seen how much inflation will come down over the next couple of months. I'm a little skeptical that inflation is not persistent," Lubik said. "Above-5% rates are certainly well within the realm of possibility and most likely warranted."

Yet another piece of good news from the January jobs report offers more reason to be optimistic that the labor market could avoid a painful landing.

A recounting of the immigrant labor force in January saw the size of the total pool of available workers growing by about a million, Lubik noted. Most other economists, including those at the Fed, reckon demographic trends will continue to shrink the supply of workers, already clipped by retirements and a lack of immigration during the pandemic. But Lubik is more optimistic.

"Going forward, higher immigration most certainly will contribute to alleviating labor shortages and increase the labor force," he said, adding demographics would have predicted a decline in participation all through the 2010s as well.

"Somehow, the labor force participation rate never fails to surprise."

MNI Washington Bureau | +1 202-371-2121 |
MNI Washington Bureau | +1 202-371-2121 |

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