Friday’s jobs report shows 339,000 jobs were created in May, beating expectations again. While Democrats and the media celebrate, the labor market condition is not as strong as this topline number suggests.
The report shows that real wages continue to decline. For the 26th consecutive month, average wages grew slower than inflation. The Biden presidency will forever be marked as one where Americans got poorer and saw their living standards decline.
Unemployment also increased significantly, reflecting the difficulties many businesses are having in today’s stagflationary economy. Since the labor market is a lagging indicator, expect unemployment to rise and topline job growth to decline in the months ahead.
The so-called JOLTS report, released earlier in the week, shows that the number of Americans quitting their jobs has significantly declined and returned to near pre-pandemic levels. Quit rates are a good proxy for labor market strength because they measure how confident employees are that they can find another job.
Quit rates remain far higher in the Republican-led Southeast and lower in the more Democrat-led Northeast, proving again that the labor market is far stronger in red states. The JOLTS report did show an increase in nationwide job openings. However, given the significant skills mismatch in the economy, vast job openings don’t necessarily reflect the overall labor market.
The big concern for small businesses right now is that the Federal Reserve will use this jobs report to increase interest rates again at its next meeting this month. Such a move will further destabilize community banks that issue 60% of all small business loans, reducing access to credit and making it much more expensive. According to Job Creators Network’s new SBIQ poll, two-thirds of small businesses say rising interest rates will reduce their access to credit.
Yet the most significant concern among small businesses and all Americans remains Bidenflation, which is accelerating once again according to the latest reading of the Fed’s favorite inflation indicator. More than half of small business owners now say inflation is their biggest concern. That’s nearly twice as many as those who made this claim in 2021 and a record high.
Consider the representative story of The Den Smokehouse & Brewery near Fresno, California, which was recently forced to close permanently because it couldn’t keep up with Bidenflation. “We were buying tri-tip for $3.89 a pound, now we are up $8, maybe $9 a pound,” said owner Caleb Walker, whose deep fryer oil costs also increased from $20 to $44.
Walker tried to offset these costs by raising the price of his tri-tip sandwich from $11 to $16. Yet customers are price sensitive. There’s only so much they’re willing to pay for a sandwich before they simply decide to eat at home.
“It’s pretty depressing,” said Walker. I “spent a lot of time, a lot of effort, a lot of money.” Similar small business casualty stories are playing out nationwide. Small businesses can’t contend with Bidenflation by raising prices, just as average Americans can’t keep up with their paychecks.
The debt ceiling deal agreed to by Congress this week will help reduce inflation and get real wages rising once again by reining in reckless spending. It stops $2.1 trillion of planned spending increases, reduces executive overreach through the implementation of pay-go rules, and unleashes domestic energy to help bring down energy costs.
Of course, we need far deeper cuts to government spending to fully get inflation under control and fix the nation’s fiscal situation. But let’s not let the perfect be the enemy of the good. Our spending addiction requires triage, stopping the bleeding before we can begin to heal.
Despite what the media will tell you, jobs day won’t be a true success until American workers’ real wages meaningfully rise again.
Alfredo Ortiz is president and CEO of Job Creators Network and author of The Real Race Revolutionaries: How Minority Entrepreneurship Can Overcome America’s Racial and Economic Divides.
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