The jobs market is still hot. And that’s a problem.

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Oct 07, 2022 View in browser   By Ben White A Now Hiring sign hangs near the entrance to a Winn-Dixie Supermarket in Hallandale, Florida. | Joe Raedle/Getty Images GOOD IS BAD — In ordinary times you might look at a monthly job gain of 263,000 and an unemployment rate down to a super low 3.5 percent and think, "Man, this is like the best economy ever." But these are not ordinary times.  The September jobs report that came out this morning, while largely fine in the abstract, helped tank all the major Wall Street indices by hundreds of points with the Dow off over 600, or around 2 percent, and the tech-dominated Nasdaq taking the worst beating, dropping nearly 4 percent. So what the heck is going on here? Well, welcome to the good-news-is-bad-news (in some ways) world. Investors dumped stocks because the jobs report came in too "hot," meaning the Federal Reserve is likely to feel compelled to keep jacking up interest rates to slow the economy and bring down inflation that remains stuck near four-decade highs. At least a piece of that inflation (though this is an area of sharp debate) stems from a super-tight labor market in which companies are having trouble finding available workers and thus having to pay more. Annualized wage growth ticked down a little in September from 5.2 percent to 5 percent. But that's still too hot for the Fed. And the jobless rate declined from 3.7 percent to 3.5 percent in part because the size of the labor force shrank by 57,000. The Fed — and pretty much everyone else — is hoping to see the exact opposite: A hot labor market cooling off in part because more people become available to work. So, while official consensus for the September report was 260,000, down from 315,000 in August, Wall Street really wanted to see an even lower number and a faster decline in wage growth. Had that occurred, the thinking goes, Fed Chair Jerome Powell and his colleagues would feel less compelled to drop another three quarters of a point rate-hike bomb on the economy next month, followed by another half point (or more) in December. As Powell has said over and over, the central bank will stop at nothing to jam inflation back down closer to 2 percent — even if it means tipping the economy into a recession and driving unemployment back up by several percentage points. Despite multiple hikes totalling 3 percent thus far this year, prices outside of energy are not dropping much. Oil prices could spike again following the announced OPEC cuts that take effect next month and Russia's continued war on Ukraine. The labor market is clearly cooling. Just not by much and not very fast. So more rate hikes are ahead and Powell cannot even shift his dour tone to suggest when the increases might end. And fear is growing — especially among Democratic political hopefuls and Wall Street traders — that the central bank will wind up hiking too much too fast, possibly creating a serious recession. It doesn't help matters that other global central banks are also tightening and the dollar is soaring, making life tough on the rest of the world and potentially depressing U.S. exports. The prospect of a synchronized global recession is now less fanciful and more … well, let's just say plausible for now. "It still doesn't seem anywhere close enough to where the Fed can take its foot off the tightening brake," Rick Rieder, chief investment officer for fixed income at Wall Street giant BlackRock wrote in a note to clients today. All attention will now turn to one of the final pieces of big economic data that will hit before the midterms, the Consumer Price Index reading that's due out Thursday. Economists expect overall consumer prices to dip a little, 0.1 percent, on a monthly basis, and the headline inflation rate to ease to a still sky-high 8.1 percent from 8.3 percent. A bigger drop would be quite welcome by Wall Street, the Fed and Democratic candidates saddled with a highly unpopular economy. But if the number is much higher than expected, look for outright panic on Wall Street and an even more aggressive Fed. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight's author at bwhite@politico.com or on Twitter at @morningmoneyben. Programming Note: POLITICO Nightly won't publish on Monday, Oct. 10. We'll be back in your inbox on Tuesday, Oct. 11.   SUBSCRIBE TO POWER SWITCH: The energy landscape is profoundly transforming. Power Switch is a daily newsletter that unlocks the most important stories driving the energy sector and the political forces shaping critical decisions about your energy future, from production to storage, distribution to consumption. Don't miss out on Power Switch, your guide to the politics of energy transformation in America and around the world. SUBSCRIBE TODAY.     Poll Watcher 66 percent The percentage of U.S. voters who say that marijuana should be legal, according to a new poll from Morning Consult/POLITICO . That's compared to 27 percent who don't think it should be legalized. Biden pardoned all people convicted of simple marijuana possession under federal law Thursday and asked for an "expeditious" review of how marijuana is scheduled under federal law. What'd I Miss? — Nobel Prize goes to human rights activists from Russia, Ukraine and Belarus: The 2022 Nobel Peace Prize was awarded today to Belarusian human rights activist Ales Bialiatski , as well as two human rights organizations, one Russian and one Ukrainian. Bialiatski emerged as a leader of the democracy movement in Belarus in the mid-1980s and founded an organization in 1996 that has developed into a robust human rights group, protesting against authorities' use of torture against political prisoners. The activist has been imprisoned twice — from 2011 to 2014 and again in 2020 — as government authorities have sought to silence him in his fight for human rights in Belarus. — Biden signs executive order on EU-U.S. data privacy agreement: President Joe Biden signed an executive order today that would limit the ability of American national security agencies to access people's personal information as part of a transatlantic data sharing agreement with the European Union. The decree follows lengthy negotiations between the United States and the EU after the bloc's highest court ruled in 2020 that Washington did not sufficiently protect Europe's data when it was transferred across the Atlantic. — Republicans slash ad buys in N.H. Senate race as Hassan leads: Senate Republicans' campaign arm is pulling millions of dollars in spending from New Hampshire's race to shore up other candidates across the board, as Democratic incumbent Maggie Hassan continues to poll ahead of her challenger. The National Republican Senatorial Committee is canceling the remainder of its fall ad slate for New Hampshire after launching a coordinated ad with GOP nominee Don Bolduc earlier this week. The move comes as New Hampshire appears increasingly out of reach for the GOP.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.     AROUND THE WORLD The U.S., South Korea and Japan participate in a joint anti-submarine drill off South Korea's eastern coast. | South Korea Defense Ministry via AP, File TSK TSK —  The United States today announced new sanctions on North Korea in response to the flurry of missile tests the country conducted this week, including one launched over Japan on Tuesday, writes Kelly Garrity. The sanctions target three entities and two individuals who assisted in exporting petroleum to North Korea, "which directly supports the development of DPRK weapons programs and its military," a statement from the Treasury Department said. "The DPRK's long-range ballistic missile launches, including over Japan, demonstrate a continued disregard for United Nations Security Council resolutions," Treasury Undersecretary Brian Nelson said in a statement. "The United States will continue to enforce multilateral sanctions and pursue the DPRK's sanctions evasion efforts worldwide, including by designating those who support these activities." But despite the back-and-forth, the Biden administration has reiterated they are open to working-level talks with North Korea without preconditions. Nightly Number $90 million The amount of cash on hand Trump's leadership PAC, Save America , has. The PAC is spending on ad buys to boost Republican Congressional Candidates, but doing so at the most expensive time for political advertising, spending sometimes three times as much money on last-minute television ad buys than Democratic opponents. Radar Sweep SURVEILLANCE STATE — In recent years, schools around the country have decided to upgrade their surveillance equipment. It helps them keep students safer, they say, and also cut down on activities like vaping in the bathrooms. This is a new market — both for companies that sell surveillance equipment and now, for school superintendents who are paid to hawk it. Aaron Gordon reports for Motherboard. Parting Words Jennifer-Ruth Green stands on top of her airplane for a portrait at the Griffith-Merrillville Airport in Griffith, Ind. on Sept. 15, 2022. | Photographs by Jim Vondruska for POLITICO UP IN THE AIR — Three thousand feet above Indiana's 1st Congressional District, Jennifer-Ruth Green guided the yoke of a 1979 Piper Warrior through a cloud-etched sky, a steely blue Lake Michigan sunning on the horizon, writes Adam Wren. "I feel more peaceful, you know? I feel more calm," she said, as she banked the plane east, making a big circle over the airport. She wore a black and green Jennifer-Ruth Green for Congress polo, a jean skirt, and black and white Chuck Taylor All-Star low tops. She was unwinding from a long day on the campaign trail, with no destination in particular — a rare moment for a hard-charging candidate and Air Force veteran. Green, 40, is locked in one of the nation's most competitive congressional races against freshman Democratic incumbent Rep. Frank Mrvan. POLITICO rates the race as leaning Democratic. But Green has made it competitive by posting record fundraising numbers — she raised $1.3 million in the third quarter, which positions her to likely outraise Mrvan for the second straight quarter. Green stands out even in a year when a historic group of 133 Black women are vying for spots in the U.S. House of Representatives. Of the 26 Black women in Congress, all are Democrats. Of the Republicans running in the 47 most vulnerable Democratic districts, 38 percent are military veterans, according to the Cook Political Report. Thirty-four percent are women. Twenty-three percent are non-white. Seventy percent are at least one of those things. Green is all three, just one of two candidates on the ballot this November to hold such a distinction. (Anna Paulina Luna, a fellow Air Force vet, who is Hispanic, is running in Florida's 13th District.) Go up in the plane with Wren and Green as they discuss her Congressional run.  Did someone forward this email to you? Sign up here.   Follow us on Twitter Charlie Mahtesian @PoliticoCharlie Calder McHugh @calder_mchugh Naomi Andu @naomiandu   Follow us

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