This week, the Department of Labor released a stronger-than-expected jobs report, showing that high inflation may continue into the foreseeable future.
Economists had predicted 180,000 jobs created in April, which was beaten by the actual 253,000 figure released Friday.
While this may initially seem like good news for the struggling American economy, it is one of the strongest indicators that persistent inflation will continue for the coming months or years.
The high job growth rate is paradoxically a sign that some sectors of the economy are overheating, sparking higher consumer prices.
It is also a key signal that the recent 0.25% interest rate hike by the Federal Reserve may not be the last.
The jobs report also came with an item of more explicit bad news. The March jobs estimate was revised lower than the initial estimates last month.
The Fed previously described a reduction in payrolls without an increase in the unemployment rate could be a sign that inflation was reducing without the need for further rate hikes. However, the recent news appears to contradict this possibility.
The 253,000 figure is well below the 2022 growth rate and represents a further slowdown compared to the strong economic growth between 2017-2019.
The increase in consumer inflation continued even following a number of aggressive interest rates. The pressure from interest rate hikes pressured a number of regional banks toward collapse.
“The real wage decline has been going on for over two years…it’s been the soft underbelly of the economy under President Biden.”
–@larry_kudlow on how workers are paying the price of Biden’s inflation pic.twitter.com/TlyJRWiQzS
— GOP (@GOP) May 5, 2023
This week, First Republic Bank collapsed following several months of financial strain. The bank had received approximately $30 billion in deposits from major institutions in March.
The end of First Republic represented the second-largest bank collapse in American history.
First Republic’s demise also followed the seizure of Silicon Valley Bank and Signature Bank by the FDIC. Washington took the unprecedented step of guaranteeing deposits higher than the FDIC’s standard $250,000 limit.
JP Morgan Chase took over the assets of the former First Republic.
The collapse also led to significant fears that further bank failures are possible. PacWest, a major regional bank, saw its stock price fall sharply earlier this week, followed by a partial recovery.