Omicron hasn’t been the only thing getting people feverish this week. The US economy recorded 467,000 new jobs in the first month of the year, bringing more people back to work and on incomes after many red lights and stop signs. While the unemployment rate has risen from 3.9% to 4% over the same period, job creation is a welcomed sign of economic health lauded by President Biden who stated “America is back to work”. The statistic vastly impressed economists who forecasted as many as 400,000 positions lost to COVID-induced shutdowns as businesses continue to grapple with the Omicron variant. A drive through the suburbs will reveal that several million Americans are still out of the workforce, either caring for themselves or sick family members. Leading sectors for job growth included business services, retail trade and transport, reflecting a much more resilient labour market. This has helped revise expectations that growth would take a hit after the Omicron strike of late 2021, with consumer spending down as the year ended with a fizzle.
This very much sets the stage for some monetary tightening in 2022, with the US boasting surprisingly limber joints despite successive bouts of COVID since 2020. Economists predict as many as seven hike this year in a progressive return to conventional monetary policy control, as inflation hawks are scurrying to contain price below its current 40-year high of 7%. Growth is 3% larger than prior to the pandemic, with further fiscal support expected in the form of a Federal investment programme that forms a part of Biden’s Build Back Better plan. The Feds are also on board to ease the adjustment, packing a one-two punch with quantitative tightening also expected. By allowing long-term Treasury holdings to mature off its balance sheet, the Feds can keep the yield curve upward sloping despite higher short-term yields. The US economy wasn’t perfect, but it hasn’t felt this way for some time. It may be time to start imagining how it could be okay now that some uncertainty is gone.
