Powell Faults an Overheated Labor Market for the Need to Hike Rates Again

Mar 23, 2023 | Bubble Monitor, No Bull Economics

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Despite growing evidence of systematic bank risks associated with the Fed’s aggressive rate hikes over the last year, Powell hikes another 25 bps anyhow, citing labor pressure as the culprit. However, in the real world, labor conditions are already improving.


According to Powell’s comments this week, “The labor market remains extremely tight. Job gains have picked up in recent months, with employment rising by an average of 351,000 jobs per month over the last three months. The unemployment rate remained low in February, at 3.6%. The labor force participation rate has edged up in recent months, and wage growth has shown some signs of easing. However, with job vacancies still very high, labor demand substantially exceeds the supply of available workers. At today’s meeting the Committee raised the target range for the federal funds rate by 1/4 percentage point, bringing the target range to 4-3/4 to 5 percent. And we are continuing the process of significantly reducing our securities holdings.”

Actual employers have a different take on the labor market as outlined below. No matter what, we should be looking for ways to lower prices (inflation) by increasing supply (putting people to work) rather than lowering demand (putting people out of work).  

Real World 4Q22 Comments about Improving Labor Conditions

Cheesecake Factory

The system had 1MM+ job applicants in 2022 & January’s applicant pool was up 3x y/y with 57 applicants for every open position.

Dutch Bros

A favorable labor market is reflected by an average of 20 applicants for every store job opening.

Casey’s General Stores

Lower turnover during the quarter drove a -31% reduction in overtime & a -20% decrease in training hours.

Carrols (largest BK franchisee)

The labor environment continues to improve with team member turnover moderating and application volume above pre-covid levels.


Turnover is down and job applications are up.

Papa John’s

Staffing challenges are stabilizing.

Jack in the Box

Higher staffing levels (particularly during the late night). Company restaurants are fully staffed & franchised stores are within 1 hour of pre-covid hours of operation.


Starbucks has been able to improve hourly employee retention by over +5% y/y, helping to stabilize operations & reduce training costs.


Hourly turnover numbers are trending in the right direction.


Job applications are increasing with stores returning to pre-covid operating hours.


90% of Chipotle’s restaurants are fully staffed & December was one of the best months in the past 2 years for both hourly & salaried employee turnover.

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