Democrats are euphoric. Talking to themselves in their closed loop, they believe they will continue to control the Senate after the November midterm elections. With just a little bit of luck, they might keep the House. Democrats presently inhabit la-la land.
Some Democrats interpreted Friday’s economic data as newly positive, believing it consistent with an economic slowdown but not a recession. That view is wrong.
The primary problem is that this Pollyanna economic view focuses overly on moderately strong employment growth, slowing wage growth, and an increase in the labor participation rate. However, the optimists ignore the very tight labor market. Because of pandemic deaths, there is a 3.5 million person shortfall in the labor force. There is little to no slack in the labor force. And while wage growth did slow for the month to an annual rate of 3.7%, wage growth over the past three months is running at 4.4%, a rate not consistent with the Federal Reserve’s 2% inflation target.
