Markets were hammered yesterday, with the Dow Jones Industrial Average falling over 1,000 points. Markets are down again today as investors worry about stagflation — a painful economic disease of high inflation and contracting growth that the U.S. hasn’t suffered through since the 1970s.
Financial markets are off to their worst start to a year since 1939, and the economy shrank in the first quarter. (RELATED: NORQUIST: Biden’s Budget — Taxes, Taxes And More Taxes)
Today’s April jobs report data offers no change in this stagflation trend. Topline job growth continues at a moderate pace, with 428,000 jobs created last month, as the economy recovers what was lost during the pandemic. Yet there are still 1.2 million fewer Americans working than before the pandemic.
Other jobs report data suggest signs of labor market weakness. The labor force participation rate fell significantly last month to 62.2% as 363,000 people exited the labor market entirely. In other words, nearly as many people left the labor force last month as the number who got jobs.
Nominal average wages also grew slower than analysts’ expectations. President Joe Biden, congressional Democrats and even Federal Reserve chair Jerome Powell have trumpeted fast wage growth as a sign of economic strength.
Yet real wages, when adjusted for historic inflation that’s rising at its most rapid pace in 41 years, are significantly declining. As a result of this Biden pay cut, Americans’ living standards are falling.
Today’s jobs data doesn’t capture the impact of this week’s move by the Federal Reserve to roughly double interest rates by raising them by 50 basis points. While this move may tame inflation, it will hurt consumers, small businesses, and the overall economy by raising the cost of borrowing.
Unfortunately, Democrats’ reckless spending has left the Fed with no other choice. Even Treasury Secretary Janet Yellen admitted this week that Biden’s spending caused inflation.
The rate hike is the bill coming due for the excessive government spending that Democrats always promised would be a free lunch.
One policy change the Biden administration can immediately take to reduce inflation and boost economic growth is to end its war on domestic energy
By reducing its numerous regulations on the domestic production and transportation of oil and gas, the administration can increase supply, reduce historic gas prices that are a regressive tax on American workers and small businesses, and create new, high-paying jobs.
Instead of asking OPEC and Venezuela to produce more oil, we should drill here at home.
According to the latest JCN Foundation Small Business IQ Poll, nearly 70% of small business owners think the Biden administration isn’t doing enough to combat inflation or supply chain problems.
Eight in ten small business owners — including 77% of Democrat small business owners — support increasing domestic oil and gas production as a practical way to help tame inflation, but the administration refuses to do so.
With savings and retirement portfolios falling and inflation rising, Americans feel poorer even if their paychecks remain the same.
And if they feel poorer, they are poorer.
This so-called reverse wealth effect will hurt the economy as Americans from all income brackets cut back on discretionary spending that fuels American small businesses and the broader economy.
Once this sentiment is reflected in the labor market, the economy will officially enter stagflation.
Alfredo Ortiz is president and CEO of Job Creators Network.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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