After a poor jobs report for May, we’ve now had two straight positive reports exceeding expectations and assuaging fears the economy is sliding back toward recession. On the theory that anything making Barack Obama’s job performance look good makes Hillary Clinton look good, it should help the Democratic nominee, right?
Well, maybe not. As Ben White explains today at Politico, good economic news could strengthen the hands of inflation hawks who have been frothing for interest-rate increases for ages. Federal Reserve chair Janet Yellen has been holding off, pointing to the economy’s underlying fragility and the total absence of any signs of actual inflation. But strong job growth could make the cries for tighter money irresistible when the Fed meets in September.
The thing is, of course, interest-rate hikes are not really popular, particularly if they succeed in tightening credit and dampening growth. A rate hike shortly before November could cast a pall on the political party controlling the White House, even though (a) it has nothing directly to do with monetary policy and (b) Republicans are actually the party of tight money thanks to their association with the creditor class, and their fear that EZ money will lead to moral hazards like those people taking out mortgages, and we saw how that turned out before, didn’t we?
Indeed, just this week, Donald Trump disparaged low interest rates, claiming they had caused a stock-market bubble. So you can add him to the broad ranks of Republicans who favor a policy that if implemented before Election Day might just happen to benefit Trump politically.
As White points out, though, if the Fed postpones any action on interest rates until after the election out of a reluctance to affect the outcome, Republicans will complain that Yellen is putting a thumb on the scales for Clinton. So the whole issue could be a lose-lose proposition for HRC, even though she’s not the one frantic to change the course of monetary policy because good economic news is actually bad news. Go figure.