Washington, DC — As the U.S. Labor Department reports nearly 340,000 jobs were created in May while the unemployment rate ticked up to 3.7%, government watchdog Accountable.US cautioned the Fed not to use the report as an excuse to continue threatening millions of jobs by hiking interest rates, especially as the report shows the economy is slowing. Last month, Fed Chairman Jerome Powell admitted “It’s possible that we have a mild recession.” And yet the Federal Reserve moved forward with its decision to hike interest rates 0.25 percentage points – the tenth increase in a row – over the dire warnings from a chorus of economists that higher interest rates will cost millions of Americans their jobs and usher in a deep recession, while doing little to address inflation drivers like corporate profiteering.
Strong and persistent job growth shows a recession is not inevitable but more likely if the Fed keeps doubling down on job-killing interest rate hikes. Alarming cracks in the economy have already formed under the pressure of punitively high interest rates. The Fed shouldn’t wait for the economic dam to burst before backing off a policy that has little to show for it. The corporate greed epidemic continues to keep prices unreasonably high no matter how many times the Fed jacks up interest rates.”
Liz Zelnick, Director of Accountable.US’ Economic Security & Corporate Power.
Cracks Forming In Economy Under Sky High Interest Rates: According to CNN: “Areas of the US economy have started to crack under the weight of persistently high inflation and a string of 10 consecutive rate hikes from the Federal Reserve. […] Some of the traditional recession indicators have been flashing red. Layoff announcements have quadrupled so far this year to 417,500, which — excluding 2020 — is the highest January to May total since 2009, according to a report from Challenger, Gray & Christmas released Thursday. Falling consumer confidence, monthly declines in the Conference Board’s Leading Economic Index, and drops in temporary help employment are also signaling that a downturn is just ahead. However, that long-predicted recession isn’t here just yet.”
Corporate Profiteering Unfazed By Higher Interest Rates: According to Axios: “Once dismissed as a fringe theory, the idea that corporate thirst for profits drives up inflation, aka ‘greedflation,’ is now being taken more seriously by economists, policymakers and the business press. […] In a speech in January, then-Fed vice chair Lael Brainard said wages weren’t the main driver of inflation and pointed to a ‘price-price spiral,’ where companies mark up prices far higher than the increases in their input costs. In March, the chief economist at UBS Global Wealth Management, Paul Donovan, published a note on ‘profit margin-led inflation,’ describing how in late 2022 and into this year, companies — particularly retailers and consumer goods makers — convinced consumers that they needed to raise prices. (They didn’t really.)”