May Jobs Report: Pretty Good or Too Good?

So the May jobs report from the Bureau of Labor Statistics came in modestly above expectations, with 280,000 net new jobs. The official unemployment rate ticked up slightly to 5.5%. A small upward revision to the terrible March report bumped its job gain number from 85,000 to 119,000. Just about all the “internal” numbers were flat, or stable, depending on how you look at it.

While this report will calm some fears that the economy is slowing down, the big question, as always, is whether it’s so good that the Fed will be under renewed pressure to accelerate interest rate hikes. I don’t have to tell you how annoying this has become; it’s as though there is a permanent cap on the economy designed to guarantee slack labor markets, high long-term unemployment and virtually invisible wage gains.

There’s little or no discussion of monetary policy in the broader political world, aside from Paulite gold-bugs. But there ought to be. From his new perch at Politico, Danny Vinik reported this week that Larry Summers appears to be close to joining the growing number of economists who favor a “nominal GDP” target for the Fed instead of rigid inflation and unemployment goals, which basically means giving the economy the kind of breathing room it needs in circumstances like the ones we are experiencing right now. Let’s hope Summers continues his evolution, and maybe communicates his views to his old friends in the Clinton household.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.