ORANGE COUNTY, Fla. — The U.S. added a robust 467,000 jobs in January, surprising economists who were bracing for hundreds of thousands of losses.
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By some accounts, the large number surprised members of the administration itself, who had been warning about a potentially weak report for days.
It added to the historic year of job gains, with many industries getting close to pre-pandemic employment levels.
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“We have the tools in place so that we can deal with the impact of this virus without having to go back to lockdowns,” National Economic Council Director Brian Deese said, crediting vaccines and booster shots for the largely uninterrupted job market.
Even economists who described the economy in a far less positive light sounded upbeat about its current trajectory.
“It’s certainly better than where it was,” University of Florida economist Dr. Amanda Phalin said. “In terms of most measures, when we compare how the economy is doing with the pre-pandemic numbers, we’re not back there.”
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Perception of the economy is even more negative among many average Americans. While some people’s views are skewed by political affiliation — Americans tend to hold lower opinions of the economy when a president of the opposing party is in office — others are feeling the pinch of inflation. Currently, prices are rising by an average of 7%, far higher than the Federal Reserve’s 2% target.
Phalin accurately predicted the current economic conditions as far back as early fall. She believes the number will begin to decline in the middle of the year.
“It’s really hard to know when and how those bottlenecks are going to unravel,” she said of the supply chain issues causing the price increases. “Experts who are really looking closely at global supply chains say that all of those bottlenecks are set to unwind starting in the in the middle of this year.”
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However, she voiced concerns about the direction of the economy as the year progresses. Federal Reserve leaders are promising interest rate hikes to reduce inflation beginning as soon as March. While it’s a common move when inflation is running at higher levels, Phalin believes they’ll be a mistake.
“A lot of those price increases are really being driven by the supply-side bottlenecks, and increasing interest rates is not going to shake loose those bottlenecks,” she said.
She used an analogy of someone overheating because they were overdressed.
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“You might have someone say, ‘Oh, well, they’ve got a really high temperature, let’s go ahead and give them some ibuprofen to bring that temperature down,’” she said. “The reason that they have a high temperature is not because internally, there’s a fever and they need ibuprofen; it’s because externally, they’re wrapped up in all these clothes.”
The effects, she said, could slow economic growth and lead to higher unemployment without affecting the inflation rate.
“I would like to see the current administration working even more closely with the private sector to try to figure out where the pressure points are,” she said. “What the U.S. government can do at a federal level to loosen some of those strictures that we’re seeing on the supply side.”
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