Inflation certainly is taking a toll, but the steps policymakers at the Federal Reserve might take to tackle the problem could hurt the job market, said Michael Shields, a researcher with liberal-leaning Policy Matters Ohio.
“I think Dayton should be more concerned about jobs,” he said. “Aggressive policy from the Fed on interest rates comes with significant risk.”
Ohio shed 11,300 jobs in June, which was the state’s first job loss since October, according to preliminary, seasonally adjusted data from the U.S. Bureau of Labor Statistics.
It was just the third time the state has cut workers in the last 26 months, since the stunning elimination of more than 830,000 jobs early in the pandemic, during lockdowns and stay-at-home orders.
Employers in Dayton metro area added a modest 400 new jobs in June (+0.1%), but it was the third consecutive month of local employment growth, the data show.
The local metro area has gained jobs in 10 of the last 13 months. The metro area consists of Montgomery, Miami and Greene counties.
So far this year, the Dayton region has notched about 5,800 new jobs.
However, local employment still remains well below pre-pandemic levels.
Inflation in the east north central region of the Midwest rose 9.8% in June, up from 8.8% in May and 8.1% in April, compared to a year earlier, according to consumer price index data from the U.S. Bureau of Labor Statistics.
The east north central includes Ohio, Illinois, Indiana, Michigan and Wisconsin.
Nationally, inflation rose 9.1% in June, compared to a year ago, which was the largest increase since late 1981.
Bureau data for the Midwest region only goes back until 2018, but June’s increase was by far the largest during that time frame and it’s likely the largest in a much longer period — probably going back decades.
Raising interest rates is the main tool the Federal Reserve has to slow the economy, reduce hiring and hold down wages, since job scarcity makes it harder for workers to bargain for higher pay, said Shields, with Policy Matters Ohio.
But Ohio’s economic recovery from the pandemic is faltering, Shields said, adding that he thinks a rapid rate increase by the Fed is unnecessary and could trigger a recession.
A large rate increase could harm working Ohioans who are already suffer the most from inflation, leading to wage suppression and job losses, he said.
Corporate profits account for a significant share of COVID-era inflation increases, Shield said, and wages are not a major driver of the current inflation.
Shields said he thinks the best ways to address inflation include a temporary tax on excess corporate profits and funding commitments for childcare to help more people return to the labor market.
Ohio’s June job numbers comes on the heels of national economic reports on inflation that are sparking fears of a recession, said Rea Hederman Jr., executive director of the Economic Research Center at the conservative-leaning Buckeye Institute.
Hederman said state policymakers should focus on making it easier for businesses to find and hire the workers and “protect taxpayers” by rebuilding the unemployment compensation fund.
“Small business owners are pessimistic about the future due to labor shortages and price increases,” he said. “These are significant headwinds for Ohio’s businesses and workers.”
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