| | | | | | | Presented By NowRx | | | | Axios Markets | | By Emily Peck and Matt Phillips ·Mar 30, 2022 | | 🐪 Hey there! It's hump day and we're thinking about hurdles facing the labor market. Know who else is apparently thinking about workers? - Yep, billionaire investor Carl Icahn just sent a letter to the CEO of Kroger noting what he calls an "unconscionable" wage gap at the company.
Plus, we've got more news on the yield curve. It's all happening! Today's newsletter is 1,064 words, 4 minutes. | | | | | | 1 big thing: Fed's inclusive recovery put to the test |  Data: BLS via FRED; Chart: Will Chase/Axios The Federal Reserve's commitment to an inclusive recovery is getting tested as it begins raising rates to combat inflation, Emily writes. Why it matters: Higher interest rates typically slow the economy, leading to higher unemployment rates. - And while the overall jobless rate is now low by historical standards, the Black unemployment rate is double that of whites and the Hispanic rate exceeds whites by more than a point.
Catch up quick: In August 2020, the Fed announced that its mandate to achieve maximum employment should be "broad-based and inclusive" — meaning it would let the economy run hotter to pull more people into the job market. - It also aimed to pay attention to employment stats for different segments of the population instead of just the overall numbers.
The big picture: While rising prices can hurt Black workers, who are disproportionately represented in lower-paying jobs, measures to fight inflation are harsh medicine. - "Inflation can have disproportionate adverse effects by race, but anti-inflation measures can have a disproportionate adverse effect by race. I'm not sure which one is necessarily worse," said William A. Darity, an economist at Duke.
- Darity spoke at a Brookings Institution event last week, where debate developed around the issue of race and the Fed.
Between the lines: Plenty of economists concur that the Fed should consider the effects of its policies on different groups of Americans — taking into account race, gender, age and disability. But there's less agreement on what exactly Fed officials can and should do. - One of the Fed's mandates is to help maintain a robust labor market — Black workers are a part of that, Michelle Holder, the president of Equitable Growth, told Axios. Any argument that the Fed shouldn't take race into account is "baffling," she said.
- Axios' Neil Irwin wrote about a recent paper showing that even in a tight labor market, a cut in the Fed's target interest rate was followed by Black employment growth of about 0.91 percentage points.
No one in this camp is saying the Fed shouldn't raise rates now, given where inflation is — but they argue the Fed should keep an eye on the effects that the rate hikes have on different groups. The other side: Skeptics of the inclusive mandate say the Fed's main tool — controlling interest rates — is a blunt instrument that's not well-equipped for addressing inequality. - "There is relatively little the Fed can do," said Paul Wachtel, professor emeritus at NYU Stern School of Business. A lot of these issues should be addressed by Congress, he added.
- Loose monetary policy has only a small effect on earnings for Black households — $134 more over five years — but at the same time widens the racial wealth gap by inflating asset values, according to a paper Wachtel co-authored and presented last week at Brookings (inspiring the debate).
What we're watching: The jobs numbers, of course. The next report is out Friday. Go deeper. |     | | | | | | 2. Catch up quick | | 🇩🇪 Germany issues warning of possible natural gas rationing. (CNBC) 💲House passes 401(k) reforms as Americans work longer. (WSJ) 👾 Hackers steal $600+ million in crypto from popular video game. (WaPo) | | | | | | | | 3. War's drag on global growth |  Data: Economist Intelligence Unit; Chart: Will Chase/Axios The war in Ukraine will cool what was supposed to be a hot economy this year, a new analysis by the Economist Intelligence Unit finds, Matt writes. Why it matters: Economic ripple effects from the war — like the surge in commodities prices and the supply chain disarray that's ensued — will spread far outside the borders of Ukraine and Russia. Driving the news: The EIU's report, published Tuesday evening, finds the war will knock half a percentage point off of its previous GDP forecast. It now sees the global economy growing 3.4% in 2022. - Among G7 nations, the sharpest decline in outlook was in Europe, especially Italy and Germany, which are both reliant on Russian energy imports.
Worth noting: Let's not forget about the people of Ukraine. EIU analysts expect the war with Russia to crater the Ukrainian economy by a whopping 47% in 2022. - "We do not believe that Ukraine's GDP will recover to pre-war levels for more than a decade," analysts at the consultancy wrote.
| | | | | | | | A message from NowRx | | A tech-powered investment even a bear would love | | |  | | | | People will always need to get their meds, making NowRx's tech-powered pharmacy a solid investment. Even in a bear market. Now, with over $26 million in annualized revenue, NowRx is poised for national expansion in 2022. Join over 10,000 others and invest in NowRx today. | | | | | | 4. 🙃 Another day, another inversion |  Data: FactSet; Chart: Baidi Wang/Axios It's really happening. We're within spitting distance of the long-awaited inversion of the yield curve — at least the portion of it that covers the 2-year and 10-year notes, Matt writes. What's new: Yields on the 2-year note briefly went higher than that of the 10-year note yesterday. - Those notes ended the day at 2.37% and 2.40%, respectively — leaving just a hair between the current world and the massive economic anarchy that yield curve purists believe will surely ensue once long-term rates fall below those of short-term rates.
Backstory: When the cost for the government to borrow over the short term is higher than the cost for a longer period, that's known as an inverted yield curve (the curve between the 5-year and 30-year also inverted this week). The big picture: While an inverted yield curve is one of the most reliable indicators of a looming recession, it's also subject to a wide range of interpretations. - Meanwhile, the version of the yield curve that's supposed to have the best track record of predicting economic downturns is the gap between the three-month bill and the 10-year Treasury note — which right now remains hugely positive.
The bottom line: Still, the flattening curves seem to reflect growing concerns on Wall Street that the Fed is going to have to push the economy into a recession by jacking up rates — sort of a Volcker shocklette — if it's really going to get inflation under control. | | | | |  | | | | If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. | | | | | | | | 5. Dropping like it's hot |  Data: BLS; Chart: Axios Visuals 🔥 ⬇️ Speaking of running a hot labor market, there were still more job openings than unemployed workers to fill them in February, according to numbers released yesterday by the Labor Department, Emily writes. But, but, but: The number of workers quitting their jobs was relatively unchanged from the previous month. That could be a sign things are cooling off. - "While the US labor market remains hot, the temperature might be dropping," Nick Bunker, the economic research director at Indeed said in a blog post.
What to watch: Devoted readers know to keep their eyes on those interest rate hikes mentioned at the top of this newsletter, as well as that pesky yield curve we can't stop writing about and Friday's jobs report for more signs of a cool down. | | | | | | | | A message from NowRx | | A tech-powered investment even a bear would love | | |  | | | | No matter what the future holds, people always need their meds. That's what makes NowRx's tech-powered pharmacy a solid investment. Using software and robotics to operate at a fraction of the cost of major chains, NowRx delivers medications same day, for free. Learn more and invest in NowRx. | | |  | It's called Smart Brevity®. Over 200 orgs use it — in a tool called Axios HQ — to drive productivity with clearer workplace communications. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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