DeepSummary
The January jobs report released by the Labor Department showed a large number of new jobs created and upward revisions for previous months, along with an increase in average hourly earnings. However, there are two concerning aspects. Firstly, the number of hours worked was down, indicating that employers are cutting work hours before resorting to layoffs due to labor shortages. Secondly, the private sector, particularly smaller businesses, saw a lack of job creation over the past year.
The report comprises two surveys: the establishment survey and the household survey. While the headline number comes from the establishment survey, the household survey often provides a better indication of what's happening with startups and smaller enterprises. In 2022, the household survey showed only about 1 million new jobs, less than half of the establishment survey figure, reflecting a disturbing lack of credit availability for smaller businesses to finance inventories and equipment.
The Federal Reserve and the Treasury Department are blamed for this situation, as their massive short-term borrowing is soaking up money that could be used productively by the private sector. Forbes suggests that the Fed should reduce its portfolio, cut the interest rate on bank reserves, and announce a focus on maintaining a stable dollar. Additionally, regulators should not impose higher reserve requirements on banks, as this would restrict lending.
Key Episodes Takeaways
- The January jobs report showed strong headline job creation but concerning trends of declining work hours and lack of job growth in the private sector, particularly among smaller businesses.
- The discrepancy between the establishment survey and the household survey indicates a lack of credit availability for smaller businesses to finance inventories and equipment.
- The Federal Reserve's policies of massive short-term borrowing and high interest rates on bank reserves are blamed for soaking up money that could be used productively by the private sector.
- Forbes suggests policy changes for the Federal Reserve, including reducing its portfolio, cutting interest rates on bank reserves, and focusing on maintaining a stable dollar.
- Higher reserve requirements on banks should be avoided, as they would restrict lending to the private sector.
- The current economic growth is driven by unsustainable government spending rather than solid private sector growth.
- Smaller businesses are facing credit constraints, limiting their ability to create jobs and contribute to economic growth.
- The episode critiques the reliance on government spending and calls for policy changes to support private sector lending and sustainable economic growth.
Top Episodes Quotes
- “Jobs offers from employers are at the lowest level since 2014.“ by Steve Forbes
- “What is powering the economy is a consumer boom made possible by the obscene levels of government spending triggered by the pandemic.“ by Steve Forbes
- “The number of jobs in the household survey only increased by about 1 million, less than half of the establishment survey.“ by Steve Forbes
- “Commercial industrial loans CNI loans by banks declined by $35 billion last year. Former World bank president David Malpest points out that given inflation and other factors in the economy, that number should have increased by $170,000,000,000.“ by Steve Forbes
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Episode Information
Steve Forbes: What's Ahead
Forbes
2/6/24
Steve Forbes calls out the two major "thorns" in the seemingly rosy January jobs report—and warns that these signs of future trouble could lead to serious economic chaos.
Steve Forbes shares his What’s Ahead Spotlights each Tuesday, Thursday and Friday.
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