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Biden cheers latest job report but inflation worries persist

SARAH MCCAMMON, HOST:

The U.S. job market is on a roll. Employers added another 263,000 jobs last month, far more than forecasters were expecting. Yesterday's jobs report capped a week of mostly positive economic news, which President Biden praised.

PRESIDENT JOE BIDEN: As we go into the holiday season, here's what this all means. The Americans are working. The economy is growing. Wages are rising faster than inflation.

MCCAMMON: NPR's Scott Horsley is here to talk about what this all means. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Sarah.

MCCAMMON: Unemployment is still very low, just 3.7% in November. Seems like a good time for anyone who's looking for work. Is that true?

HORSLEY: It is. Opportunities are plentiful. There are more job openings. And there are people looking for work. And as a result, employers are having to bid up wages at a pretty rapid rate. Now, the president is cherry-picking a bit when he says wages are outpacing inflation. There have been some months when that's been true. Over the last year though, average wages have not kept pace with inflation. Wages in November were up 5.1% from a year ago. We know prices have been climbing faster than that. There's no question, though; wages are rising at a rapid rate. And while that's good for workers, Julia Pollak, who's chief economist at the job search website ZipRecruiter, says it could add even more fuel to the inflationary fire.

JULIA POLLAK: Wage growth does seem to be the main sort of contributing factor now to inflation. Initially, you know, it was energy prices and supply chain issues and goods prices. But core services inflation is now very much the driving issue, and that is very much tied to wages.

HORSLEY: The inflation watchdogs at the Federal Reserve are nervous about that even though we have started to see a drop in the price of some things like gasoline and used cars. There's a worry that services could get more expensive as a result of rising wages.

MCCAMMON: Yeah. So is that what's driving the Feds to raise these interest rates?

HORSLEY: That's right. The Fed has been raising interest rates at the fastest pace in decades from near zero back in March to just under 4% today. That's making it more expensive to get a car loan or a mortgage or to carry a balance on your credit card. And all that's designed to slow down the economy and the job market. It takes time for those rate hikes to work, though. And outside of a few very sensitive sectors, we're just not seeing much of a slowdown yet.

MCCAMMON: We did get news this week, Scott, that the economy grew faster in the late summer and early fall than initially reported. What does that mean?

HORSLEY: Right. When the third-quarter GDP report initially came out about a month ago, the Commerce Department said the economy had grown at an annual pace of 2.6%. This week, revised data showed the growth rate was actually a little bit better than that - 2.9%. Some of that is exaggerated by things like trade that have already started to turn around. But we did see a real improvement in business investment and consumer spending.

MCCAMMON: As you might expect this time of year, we just saw an avalanche of spending after the Thanksgiving holiday to kick off the holiday shopping. Is that a good sign?

HORSLEY: It's a sign the American consumer is still very much alive and well. Now, that's important because consumer spending is the biggest driver of the overall economy. It's not clear, though, how long shoppers can keep that up. Another report this week showed that consumer spending in October increased faster than people's incomes.

Now, how is that possible? Well, people are dipping into savings and putting it on the credit card. Early in the pandemic, when people couldn't spend money and the government was sending out relief payments, savings rates soared. But now that cash cushion is being whittled away. The savings rate in October was the lowest in 17 years while credit card debt is climbing. And that can't go on forever.

MCCAMMON: NPR's Scott Horsley. Thanks so much, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Sarah McCammon
Sarah McCammon is a National Correspondent covering the Mid-Atlantic and Southeast for NPR. Her work focuses on political, social and cultural divides in America, including abortion and reproductive rights, and the intersections of politics and religion. She's also a frequent guest host for NPR news magazines, podcasts and special coverage.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.