SCOTT SIMON, HOST:
The latest jobs report is out.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT JOE BIDEN: I'm happy to report that our economy has created over 300,000 new jobs last month, and that's on top of a half a million jobs we added the month before.
SIMON: President Biden at the White House yesterday. As he said, he's happy. But are companies and their investors and the Federal Reserve? Barry Ritholtz is a columnist and chairman of Ritholtz Wealth Management. He joins us from New York.
Thanks so much for being with us.
BARRY RITHOLTZ: Thanks for having me.
SIMON: What's your assessment of the latest report from everybody's favorite publisher, the Bureau of Labor Statistics?
RITHOLTZ: It seems to be the report that we most overreact to. We created 311,000 jobs out of an economy with over 155 million. What matters is the trend. And the trend has been we are creating a decent number of jobs at a reasonable wage, with very modest unemployment. The bigger concern is that the Fed has been overreacting to inflation numbers, which really seem to have peaked last year, and how much damage are they going to do to the economy before this is all said and done.
SIMON: Damage to the economy by raising interest rates?
RITHOLTZ: Well, keep in mind, the Fed has a dual mandate - price stability, which is preventing or moderating inflation, and full employment. And what seemed to have happened is that the Fed sort of fell asleep at the switch when inflation started to tick up towards the end of 2020 and into '21. Today it seems that they're just raising rates so aggressively that it's causing all sorts of fallout and damage. The most recent seems to be what's happening at Silicon Valley Bank, which has been around forever and somehow ran into trouble buying U.S. Treasuries. It's sort of unheard of that a bank owning treasuries is somehow going to get hurt.
SIMON: Explain to us how to understand month after month of adding jobs and then layoffs at Google's Alphabet, Goldman Sachs, 3M and so many other places.
RITHOLTZ: What happened over the past couple of years is an overhiring by a number of big technology companies. What did Amazon announce? They doubled in size over the past three years from 800,000 workers to 1 1/2 million workers. So really, they're just undoing the last leg of that hiring spasm we've seen during the past few years.
SIMON: When Chairman Powell said this week that rates are going to be higher than previously anticipated, was he wrong?
RITHOLTZ: To the Fed's credit - and we have a tendency to forget about this - go back in time - I don't mean a century, but just 20, 30 years, and the Fed didn't talk to the public. They didn't talk to the markets. We would track what the Federal Reserve was doing based on money supply measurements that would come out every Thursday and Open Market Committee activities that you would hear through the grapevine. And so you kind of had to piece it together, and sometimes that led to misunderstandings that led to problems.
It seems like the Fed has overcompensated, and there is something to be said about a little bit of mystery as to what happens next so we don't get these wild swings in the stock and bond market as everybody sort of repositions themselves to whatever the latest speech was or the latest congressional testimony by the chairman. A little bit of mystery wouldn't hurt.
SIMON: I realize people pay money for this, but what do you tell your investors, your clients?
RITHOLTZ: All of this comes back to the Federal Reserve. I think it's time for them to sit on their hands for a couple of meetings and see what the results of their inputs into the economy actually are, to see how it works. Remember, Fed policy acts with a lag, and there is a debate amongst economists how long of a lag it is. But clearly, we don't know the results of all of the recent, very rapid increases other than what we've started to see in the banking sector. And I think it really behooves the Fed to step back and just see the results of their handiwork before possibly making things worse.
SIMON: Barry Ritholtz is chairman of Ritholtz Wealth Management.
Thanks so much for being with us, sir.
RITHOLTZ: My pleasure. Thanks for having me. Transcript provided by NPR, Copyright NPR.
