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One of the dumbest things at this moment in American capitalism is the way the Fed has to inflict pain when, in general, things are very good. We the people can create the strongest job market in a generation and what do we get in return? Higher borrowing costs and possible recession.

Here’s the deal: The job market is still very strong. And while that’s great news for workers, it’s bad news for the Federal Reserve.

Today, as the central bank convened at the start of the two-day policy meeting, economists got a surprise by other data showing that the labor market is restless.

Economists had expected a drop in US job vacancies in the closely watched September JOLTS report, given how aggressively the central bank raised interest rates. Instead, the number of jobs available in the United States a plus in September. Meaning workers are still in high demand.

(JOLTS, by the way, is the cooler acronym we use for the label “Job Opportunity and Employment Turnover Questionnaire.”)

Key stats:

  • There were 10.7 million jobs open in September, up from 10.3 million in August.
  • This is still well above the pre-Covid level of 7 million openings.
  • There were approximately 1.9 positions open per person looking for work in September – up from 1.7 in August.
  • The “quit smoking rate” settled at 2.7%, or about 4.1 million workers voluntarily quit their jobs – not a record, but still historically high.
  • “If you’re waiting for signs of labor inflation going down, you’re going to have to wait,” said Ron Hetrick, chief economist at Lightcast, in brief.

why does it matter: The mismatch in supply and demand for workers creates upward pressure on wages and, consequently, inflation. People feel empowered to demand higher wages when they know that managers struggle to hire and retain employees. And higher wages = more spending of money = more demand = higher prices.

For Fed credit, the wage-price spiral is a real and frightening risk that it desperately wants to avoid. This does not mean that people are not allowed to get angry about it. Democrats, in particular, are vocal, calling the Fed’s plan “foolish” and warning that Powell will be responsible for millions of layoffs if he does not calm down from rising rates. The United Nations is also unhappy, saying the Fed’s policies risk doing more damage globally than the 2008 financial crisis and the COVID-19 shock in 2020.

Which the Fed says more or less, look, we hear you, but we don’t have much choice here. Either we lower inflation now and deal with “some pain” (read: layoffs, potential recession, wage depreciation), or lower inflation later and deal with a lot of pain (all bad things, but the worst).

The Big Picture

Economics has been very strange (to use a technical term) since the pandemic, and things are getting more and more weird.

On the one hand, the housing market is slowing and consumer spending – the biggest driver of economic growth in the US – is slowing. But the job market hardly buds.

Americans can be satisfied that their jobs are strong and their wages are rising. But inflation spoils all that. And as the Fed tries more aggressively to bring it down, it takes months for the impact of higher interest rates to appear.

Look Ahead: The consensus now is that the Fed will unleash a 0.75% rate hike on Wednesday, and that it won’t back down from that aggressive pace for long.

But all eyes will be on the silver fox, Jay Powell, when he takes to the podium tomorrow. The 75 basis point increase is pretty much guaranteed, but Wall Street (and journalists) will analyze every syllable of the central bank chief’s mouth for clues about how long the tightening policy will last.

(Fed press conference drinking game idea: Take a big gulp every time Powell says “mandate” or “stabilize the rate.” Finish your drink if you dare say the words “pivot” or “temp.”)

Look what we made her do… Taylor Swift had a Top 10 slot on the Billboard Hot 100 all at once. This has never happened before.

(Which is all the more surprising because her new album “Midnights,” frankly, doesn’t hold the candle of “1989.” And I’m going to die on that hill.)

Follow up on our work topic this evening…

Managers have done all kinds of things to try to attract and retain talent. Signature bonuses, extra vacation days, flexible hours. None of these are super crazy, but they are unfortunately rare outside of white collar jobs.

One popular option: a shorter work week.

One Miami Chick-fil-A owner has been inundated with applications after switching his employees to a three-day work week.

He divided his staff of 38 – 18 store managers and 20 front-line employees – into two groups and alternating weekly schedules into groups of three days of 13 to 14 hour shifts. (The chain is closed on Sundays.)

The result: 100% management-wide retention and an avalanche of orders, my colleague Barriga Cavallans reports. The opening this fall attracted more than 420 candidates.

Bottom line: It doesn’t sound like a broken record but: people throughout the workforce are on fire. The pandemic blew up the standard five-day, 40-hour pattern that has shaped our existence for generations.

But with workers in high demand, it is a matter of hiring managers to figure out a better way.

“I think people want to work in this industry,” Chick-fil-A owner Justin Lindsay told QSR magazine. “But they want to change some things, and I think that’s what this showed — that there are things that if we change them for the better, we’ll have a lasting impact.”

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