U.S. Job Market Posts Strong Numbers Despite Inflation

The U.S. labor market is holding steady, despite concerns that inflation might hamper its ability to create jobs. The numbers, however, are bolstered by the return of striking workers to the workforce.

Dec 10, 2023 - 11:00

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U.S. Job Market Posts Strong Numbers Despite Inflation

Following the end of several high-profile labor strikes, the U.S. labor market added 199,000 jobs in November, up from the 150,000 jobs posted in October. As NPR reported, even though there is less hiring being done currently, there was still enough increase to keep unemployment steady at 3.7%, which is down slightly from October’s 3.9% unemployment rate. According to NPR, some job gains can be attributed to the return of striking auto workers and Hollywood writers.

Additionally, the data suggests that the labor market is doing quite well for itself despite severe interest rate hikes by the Fed. When unemployment is high, the Fed typically lowers interest rates and vice versa. Still, the Fed’s interest in curbing inflation took precedence over stimulating the economy, which has not affected the labor market adversely. Even though wage growth has slowed, it is still up 4% from where it was in November 2022, which has given the actual buying power of workers a boost.

Speaking of inflation, CNBC reports that excess profits from companies like Exxon Mobil, Shell, and Kraft-Heinz helped to kick up inflation-aided earnings for the companies, which naturally placed more burdens on consumers paying for their products. According to a joint study from the Institute For Public Policy Research and Common Wealth, both British think tanks, “Companies with (temporary) market power seemed to be able to protect their margins or even reap ‘excess profits’, setting prices higher than would be socially and economically beneficial.”

Their report stresses that these companies did not create the inflation that kicked off following the Russian invasion of Ukraine, but they certainly did not mind profiting from it either. Although there is no consensus within the economic community regarding the concept of “greedflation,” or overcorrecting prices to compensate for market movements or higher production costs so that profit can be turned, it has been called a potential contributing factor to inflation by some analysts, as well as Christine Lagarde, the European Bank Central president.

In May 2023, Lagarde accused some companies of using the uncertainty of inflation to their benefit, saying, “In some sectors, firms have been able to increase their profit margins on the back of mismatches between supply and demand, and the uncertainty created by high and volatile inflation.”