Economy Labor Robert Reich

As Job Gains Slow, the Fed and Congress Apply the Wrong Medicine

The economy is in imminent danger of slowing.
Photo by Karolina Grabowska on

By Robert Reich /

Friday’s jobs report from the Department of Labor was a warning sign about the US economy. It should cause widespread concern about the Fed’s plans to raise interest rates to control inflation. And it should cause policymakers to rethink ending government supports such as extended unemployment insurance and the child tax credit. These will soon be needed to keep millions of families afloat.

Employers added only 199,000 jobs in December. That’s the fewest new jobs added in any month last year. In November, employers added 249,000. The average for 2021 was 537,000 jobs per month. Note also that the December survey was done in mid-December, before the latest surge in the Omicron variant of Covid caused millions of people to stay home.

But the Fed is focused on the fact that average hourly wages climbed 4.7% over the year. Central bankers believe those wage increases have been pushing up prices. They also believe the US is nearing “full employment” – the maximum rate of employment possible without igniting even more inflation.

As a result, the Fed is about to prescribe the wrong medicine. It’s going to raise interest rates to slow the economy – even though millions of former workers have yet to return to the job market and even though job growth is slowing sharply. Higher interest rates will cause more job losses. Slowing the economy will make it harder for workers to get real wage increases. And it will put millions of Americans at risk.

The Fed has it backwards. Wage increases have not caused prices to rise. Price increases have caused real wages (what wages can actually purchase) to fall. Prices are increasing at the rate of 6.8% annually but wages are growing only between 3-4%.

The most important cause of inflation is corporate power to raise prices.

Yes, supply bottlenecks have caused the costs of some components and materials to rise. But large corporations have been using these rising costs to justify increasing their own prices when there’s no reason for them to do so.

Corporate profits are at a record high. If corporations faced tough competition, they would not pass those wage increases on to customers in the form of higher prices. They’d absorb them and cut their profits.

But they don’t have to do this because most industries are now oligopolies composed of a handful of major producers that coordinate price increases.

Yes, employers have felt compelled to raise nominal wages to keep and attract workers. But that’s only because employers cannot find and keep workers at the lower nominal wages they’d been offering. They would have no problem finding and retaining workers if they raised wages in real terms – that is, over the rate of inflation they themselves are creating.

Astonishingly, some lawmakers and economists continue to worry that the government is contributing to inflation by providing too much help to working people. A few, including some Democrats like Joe Manchin and Kyrsten Sinema, are unwilling to support Biden’s Build Back Better package because they fear additional government spending will fuel inflation.

Here again, the reality is exactly the opposite. The economy is in imminent danger of slowing, as the December job numbers (collected before the Omicron surge) reveal.

Many Americans will soon need additional help since they can no longer count on extra unemployment benefits, stimulus payments or additional child tax credits. This is hardly the time to put on the fiscal brakes.

Policymakers at the Fed and in Congress continue to disregard the elephant in the room: the power of large corporations to raise prices. As a result, they’re on the way to hurting the people who have been taking it on the chin for decades – average working people.

Robert Reich
Robert Reich

Robert Reich writes at His latest book is “THE SYSTEM: Who Rigged It, How To Fix It.” He is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. He has written 17 other books, including the best sellers “Aftershock,””The Work of Nations,” “Beyond Outrage,” and “The Common Good.” He is a founding editor of the American Prospect magazine, founder of Inequality Media, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentaries “Inequality For All,” streaming on YouTube, and “Saving Capitalism,” now streaming on Netflix. 


  1. In the U.S., the global neoliberal project of the past half century has made significant strides in impoverishing record numbers of people through structural adjustment and austerity policies that center on disinvestment from public programs, services and infrastructure. In doing so, this has created the rationale to transfer traditional public sector responsibilities to venture philanthropists and financial investors who are now applying the BoP model to employ impact investment strategies throughout the country. Guided by the belief that “impact investing is a powerful model with the potential to build markets and drive change for the people who need it most” (Bill Gates), BoP investment strategies or “opportunities” in the U.S. are focusing on: healthcare, education, microfinance, housing, real estate, small business development, natural resources conservation, sustainable agriculture, water and sanitation and clean energy.

    Social Impact Bonds (SIB) are one of the most popular instruments of the impact investment industry, which are, in essence. derivatives or swaps (bets). According to the Rockefeller Foundation, which has pioneered SIB’s:

    Sitting at nexus of the Foundation’s work in scaling innovation and impact investing, social impact bonds (SIBs), like ‘pay-for-success’ projects, represent one component of the rapidly growing field of innovative finance, aimed at helping state and local governments fund critical social programs through a combination of government initiation, private investment, and non-profit implementation.

    In sum, impact investing is promoted by neoliberal governments and their private sector partners through manipulative marketing storylines intended to convince us that elite financial investors are best positioned to mitigate long-standing social inequities. Never mind the fact that these social conditions are the generators of their wealth and power and result from the financial instruments they employ to allegedly “do good.” Thus, in the age of financialization and within the ever solidifying state-finance nexus, venture capitalists – through the veneer of their generous and public spirited foundations – are the benevolent titans of international development and the arbiters of public, civic and social life. More dramatically, these powerful dynamics enable billionaire foundations to hasten the process by which financial institutions serve as the overlords of all aspects of life on our plane

  2. Can you guys talk about how businesses are creating fake job postings in order to not pay back their PPP loans that they took out? If you search online, its says at least 60% of PPP funds have to go to payroll, and there are exceptions to the law, like if they cannot fire a qualified candidate.

    For example, I have 2 college degrees, applied to education coordinator at a forest preserve. I have experience both in environment and teaching. Applied on the same day. Got denied within 2 hours on Indeed. Emailed the place. Person responds saying I need hunting experience. Mind you this is a 10 min drive from a big shopping mall. What kind of hunting is there near an area with residents? This is a giant scam.

    Instead of saying this is a recession after what happened in 2020, they blame it on the people, saying there is a labor shortage. Nothing has changed. If there is a shortage, then its in the fast food industry where, for example, my local little Caesars is closed because no workers. Imagine having to make over 100 pizzas and there are only 2 people working, one cashier and 1 making the pizza. Of course the person would work a little and quit, saying the conditions are unfair, because they are.

    Nothing has fundamentally changed. This is just the media doing business in lying. They lied about Trump, smearing his name. They lie now to cover Bidens butt, as they did when Obama was President. What did Obama do for Chicago in the 8 years he has been president? Nothing. He put his library on the South Side. The kids of Chicago cant even read, let alone at a grade school level. Talk about irony.


      Who holds the purse strings to the majority of the world’s wealth? There is a new global elite at the controls of our economic future, and here former Project Censored director and media monitoring sociologist Peter Phillips unveils for the general reader just who these players are. The book includes such power players as Larry Fink, Bill Gates, Jeff Bezos, Jamie Dimon, and Warren Buffett.

      As the number of men with as much wealth as half the world fell from sixty-two to just eight between January 2016 and January 2017, according to Oxfam International, fewer than 200 super-connected asset managers at only 17 asset management firms—each with well over a trillion dollars in assets under management–now represent the financial core of the world’s transnational capitalist class. Members of the global power elite are the management–the facilitators–of world capitalism, the firewall protecting the capital investment, growth, and debt collection that keeps the status quo from changing. Each chapter in Giants identifies by name the members of this international club of multi-millionaires, their 17 global financial companies—and including NGOs such as the Group of Thirty and the Trilateral Commission—and their transnational military protectors, so the reader, for the first time anywhere, can identify who constitutes this network of influence, where the wealth is concentrated, how it suppresses social movements, and how it can be redistributed for maximum systemic change.

  3. Infinite growth on a finite planet isn’t economical. It’s lunacy.

    Cancer is also a growth.

    Slow is beautiful.

    And yes, corporate shareholders are greedy pigs. What else is new, Professor?

  4. My religious camp employers don’t pay into the CA unemployment insurance program, therefore when my hours are being drastically cut now I’m relying on my Social Security money (which isn’t enough to make it monthly, which is why I’m working two jobs in food service at these camps). Food service dining halls, essentially all restaurant work, is again being hammered. Legislation is nowhere to be seen addressing this. HELP !

  5. I disagree with the utility of the fed keeping real rates negative and the QE money printing. Both are inflating asset prices like stocks and real estate and thus almost all benefits are flowing to the 1%. Fiscal stimulus like UBI and a living wage law would help those in need much more.

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