"Federal Reserve's megaphone": Low employment growth may become the new normal, but it is particularly vulnerable in the context of war

According to Jinshi reports, "Fed mouthpiece" Nick Timiraos wrote that 178,000 new jobs were added in March, reversing the significant decline in February. The unemployment rate also dropped to 4.3%.

However, some details are not very optimistic, as wage growth for ordinary workers has slowed to the lowest year-on-year growth rate in five years since the pandemic recovery. Averaging these two volatile months reveals a clearer underlying trend: an average of only 22,500 new jobs per month. Two years ago, adding 22,500 jobs per month would have raised alarms; today, such a level may still be considered acceptable.

Federal Reserve officials are still trying to explain this change. San Francisco Fed President Mary Daly wrote on Friday, "It is not easy for the public to understand that zero job growth can still be consistent with full employment." This situation is particularly fragile in the face of new supply shocks. If the war in Iran continues, high fuel costs or commodity shortages could squeeze businesses and consumers, leaving the labor market without a buffer to absorb the shocks. Meanwhile, concerns about inflation may weaken the certainty of interest rate cuts, further limiting the Fed's policy space.

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