Washington, DC — Following the U.S. Labor Department’s report finding job gains in April beat expectation with over a quarter million jobs added, 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. This week, 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.
Continued and welcomed growth in the labor market shows a recession is not inevitable – but chances of one soar if the Fed stays the course with more job-killing interest rate hikes. The economy is already starting to buckle under the pressure of punitively high interest rates, so why does the Fed keep turning up the dial? It’s time to reassess this one-track-minded policy that has failed to root out one of the top drivers of rising costs: corporate greed and profiteering.”
Liz Zelnick, Director of Accountable.US’ Economic Security & Corporate Power Program.
Cracks Forming In Economy Under Sky High Interest Rates: According to the New York Times: “[M]anufacturing is suffering something of a hangover as retailers burn through bloated inventories. Inflation-fighting efforts by the Federal Reserve […]have squelched big-ticket purchases. New orders have been declining since last summer, and a widely followed index of purchasing activity has been downbeat for six months.” This comes as “job openings fell more than expected in March to lowest level in nearly two years.” The Federal Reserve’s own projections in December found that higher rates will drive up the unemployment rate to 4.6 percent – costing at least 2 million Americans their jobs.
Corporate Profiteering Unfazed By Higher Interest Rates: According to the Wall Street Journal: “Inflation has proved more stubborn than central banks bargained for when prices started surging two years ago. Now some economists think they know why: Businesses are using a rare opportunity to boost their profit margins. […] Inflation rates also remain uncomfortably high in the U.S. and many other parts of the world despite interest-rate rises that have gone further and been delivered more quickly than at any time since the 1980s. […] [T]here are signs that companies are doing more than covering their costs. According to economists at the ECB, businesses have been padding their profits. That, they said, was a bigger factor in fueling inflation during the second half of last year than rising wages were. […] Last month, Procter & Gamble said it had boosted its profit margins in the first three months of the year, thanks in large part to higher prices.”