PREDICTIONS AND POLICIES… The predictions that guide policies are failing to perform as expected. These predictions are often the ones that conflict with common sense. Their failure makes it even more difficult for those who try to forecast their typically dim futures. Here are some examples:

Today, the employment figures came in. The number of new workers rose more than expected — and more than any economic group predicted. The long-held belief that the employable workforce was limited has failed to materialize. In reality, the increased supply of job openings attracted additional workers. Payrolls expanded by 225,000, well above the consensus of 165,000 and higher than any economic group had forecast.

At the same time, the new unemployment rate rose from 3.5% to 3.6%. While unusual, it happens. It means that although 225,000 people found jobs, an additional 350,000 individuals entered the workforce looking for positions. A growing workforce is a positive when available jobs exceed job seekers.

The percentage of the workforce filing new applications for unemployment insurance was at the lowest level ever. This very positive trend may stem from two opposing factors: American workers are happy with their jobs, as surveys suggest, or they are hesitant to seek new jobs — especially if it requires relocation. Perhaps it’s a bit of both.

One good sign: the tariff war has not derailed ongoing growth. It has simply offset the gains that would have come from the corporate tax cuts, which had aligned our tax system more closely with global standards.

One of the most absurd views is that high employment levels cause inflation. This belief drives the Federal Reserve to consider raising interest rates to reduce employment as a way to control inflation. But this notion has lost credibility over the past decade, which saw growth with low inflation. Yet the Fed still aims to increase inflation by 2% annually. I suppose that’s fine — unless you’re poor, in which case it hurts the most.

Probably the most important prediction I’ve heard recently came from several prominent Democrats, including Larry Summers: that economic growth is the single most important issue. Only with sustained growth will there be enough resources to tackle the many priorities discussed during the campaign.

Katz Family Financial