Washington sees effect of national anti-inflation policies
Thu, May 25, 2023 11:48 AM
By Logan Washburn, The Center Square
Washington state is seeing the effects of federal attempts to reduce inflation, as workers have been flooding the market.
“As a state, we pretty much just get on a bus, and the federal government is the driver,” said state Employment Security Department State Economist Paul Turek. “All we’re doing is jockeying for the best seat.”
Turek said the labor market has started to “loosen up” with the federal government’s measures to mitigate inflation. While the nation’s inflation rate reached 9.1% in June 2022, it fell to 4.9% by April 2023, according to Statista.
The Federal Reserve raised interest rates from 5% to 5.25% on May 3, according to Forbes. Turek said the Fed has been taking measures like this in hopes of reaching a “soft landing.”
“The history is such that that’s very difficult to achieve,” he said. “The hopes are, try to beat inflation without causing a recession.”
Meanwhile, Congress and President Joe Biden are grappling with the issue of raising the debt ceiling. Unless they reach an agreement by June 1, America risks defaulting on its national debt. America’s federal debt currently equals 98% of its GDP, according to the Congressional Budget Office.
Turek said he thinks intervention can have unintended consequences, so the results of these measures will be better seen with time.
Local market conditions reflect these national economic policies, according to Turek.
In Washington, Turek said employers had a high demand for workers in the aftermath of COVID-19, but the workforce was slow to respond. Since the unemployment rate only measures workers seeking a job, the unemployment rate was just less than 4% in August 2022, according to an ESD report.
But by February 2023, the report said, Washington’s unemployment rate had spiked to 4.6%. Turek said this was because the workforce, seeing the effects of inflation from high levels of spending, finally responded by flooding the market with workers. Employers could not absorb this surplus of workers, so unemployment increased.
“To deal with inflation, policymakers have been trying to bring together and balance out the supply and demand for workers,” Turek said. “As that's been occurring, the rate of inflation is starting to go down.”
Since this jump in unemployment, Washington added 6,100 nonfarm jobs in April, according to an ESD report. This reduced the state’s unemployment rate to 4.3%.
“The demand for workers has gone down, we’re seeing that in the other indications that we’ve tracked,” Turek said. “They still want workers. They just don't want as many as what they wanted before.”
America’s unemployment rate also decreased, “changing little” to 3.4% in April, according to a Bureau of Labor Statistics report.
Turek said he thinks the economy is unpredictable going forward, but that the state of Washington will follow the nation.
“It’s going to follow the lead that’s established at the federal level,” Turek said. “It may be a little worse, or it may be a little better, but we're going wherever the bus takes us."