The Job Market Is Still Too Hot for the Fed

Senate Republicans Roll Out Bill to Repeal Democrats’ Drug-Pricing Reforms

Senate Republicans have introduced a bill that would undo drug pricing reforms recently enacted by Democrats, including allowing the federal government to negotiate some prescription drug prices and capping annual out-of-pocket prescription costs under Medicare at $2,000.

The Protecting Drug Innovation Act introduced by Republican Sens. James Lankford of Oklahoma, Mike Lee of Utah, Cynthia Lummis of Wyoming and Marco Rubio of Florida takes aim at reforms made as part of the Inflation Reduction Act, which was passed by Democrats in August without a single Republican vote.

Republicans criticized the changes as government price controls that would undercut pharmaceutical industry innovation, citing an estimate by the nonpartisan Congressional Budget Office that the Democratic legislation would lead to the introduction of about 15 fewer drugs over the next 30 years. The budget office analysis still expects some 1,300 drugs to be approved over that timeframe.

“We need more drug options, not less,” Lankford said in a statement. “We need more competition, not price controls. We need innovation, not stagnation. Our bill reduces the damage done by the Democrats’ short-sighted bill, but additional reforms are desperately needed to actually bring down costs for seniors in the long term.”

Democrats rushed to defend their reforms, which polling has found to be overwhelmingly popular, and to warn that Republicans would raise prescription drug costs.

“Today, MAGA Congressional Republicans introduced legislation that puts special interests before working families,” White House press secretary Karine Jean-Pierre said. “Their new bill is a giveaway to big pharma at the expense of seniors by ending Medicare’s new ability to negotiate lower drug prices. Their vision for the country is extreme and out of touch with working families across the country.”

At an event in Hagerstown, Maryland, on Friday, Biden echoed that warning about what might happen if Republicans win in November: “They’re saying they’re going to repeal the Inflation Reduction Act if they gain control of Congress,” he said. “Let’s be crystal clear what that means. If Republicans take control over Congress, it means the power we just gave Medicare to negotiate drug prices goes away. Gone. Prices go back up.”

The bottom line: Democrats are sure to highlight this bill in their midterm campaigning.

Jobs Market Cools — but Probably Not Enough to Slow the Fed’s Tightening Campaign

The U.S. labor market cooled a bit in September but continues to expand at an impressive pace.

Employers added 263,000 jobs, the Labor Department said in its monthly jobs report, down from the 315,000 recorded in August but higher than analysts had expected. The unemployment rate recorded a surprising decrease to 3.5%, matching a 50-year low, driven in part by a decline in the labor force participation rate.

Wage growth eased slightly, with average hourly earnings rising by 0.3%, below the 0.4% rate recorded in the first seven months of the year. Although pay hikes are still high relative to historic norms, workers continue to lose ground as inflation eats away at their wage increases.

“With 10 million jobs added since President Biden took office and an average of more than 370,000 per month over the last three months, this economy continues to produce strong and steady job growth that benefits workers and their families,” Secretary of Labor Marty Walsh said in a statement.

Overall, the September jobs numbers suggest that the Fed’s efforts are starting to produce some results in the economy, but not enough to make a significant dent in the inflation rate.

What the experts are saying: “We are seeing labor demand cool,” said economist Sarah House of Wells Fargo. “But we have a long way to go towards restoring balance between supply and demand for labor.” Wage gains are “still too strong for an inflation target of 2%, but it’s a step in the right direction,” she added.

“The labor market remains tight, and the supply of workers isn’t growing fast enough to bring down wage growth,” Bloomberg economists Anna Wong, Andrew Husby and Eliza Winger said. “Adjusted for slowing productivity growth, wage growth is running at least triple the pace consistent with the Fed’s price target.”

RSM Chief Economist Joseph Brusuelas said the report offered nothing to suggest that the Fed would soon pivot and relax its tightening campaign. “With third-quarter growth trending in the vicinity of 3% and hiring remaining stout, the case for the Federal Reserve to moderate its rate increases remains weak,” Brusuelas wrote. “The job gains in September, a 3.5% unemployment rate on the month and an average hourly earnings increase of 5% on a year-ago basis are simply not sufficient for the central bank to pull back on its efforts to restore price stability.”

The bottom line: The labor market continues to show signs of strength even as it cools somewhat, and many analysts say that the stronger-than-expected jobs report means that another “jumbo” interest rate hike of 75 basis points is likely when the Fed holds its next meeting in early November.

Number of the Day: 299

This doesn’t relate to fiscal policy per se, but it merits mention here nonetheless: 299 Republicans on the ballot next month in House, Senate and statewide offices have denied or questioned the result of the 2020 presidential election, according to an analysis by The Washington Post. That’s 53% of the 569 candidates examined by the Post, which adds that a majority of the 299 election-denying candidates are likely to win.

The rise of election deniers will have major repercussions for the functioning of our democracy — and that’s even before the next presidential contest. “It’s quite possible in 2022 we’re going to have a serious set of challenges before the new Congress is seated, and then this will escalate as we move toward 2024 and another presidential election, in which the candidates, again, almost required by the Trumpians, will be challenging election outcomes,” Larry Jacobs, a politics professor at the University of Minnesota, told the Post.

• The Job Market Is Slowing — But Not Enough to Calm Wall Street’s Fears – Washington Post
• The Job Market Has Been Like Musical Chairs. Will the Music Stop? – New York Times
• Global Fallout From Rate Moves Won’t Stop the Fed – New York Times
• Republicans Called Biden’s Infrastructure Program ‘Socialism.’ Then They Asked for Money – CNN
• Hurricane Ian May Have Caused $67 Billion in Damage, a Top 5 U.S. Storm – Axios
• Pandemic Struggles Still Afflict Social Security, a Last Lifeline for Many – Washington Post
• Gas Prices in U.S. Rise for a Second Week After Refineries Shut Down – New York Times
• Biden’s Saudi Trip Faces New Scrutiny After OPEC Oil Cut – Washington Post
• Drugmakers Will Be Penalized if They Hike Prices on Patients in Private Insurance Market – STAT
• Few Americans Get New Covid Booster Shot Ahead of Projected Winter Surge – Washington Post
• Biden Administration Has Reunited 500 Families Separated Under Trump – The Hill
• Justice Dept. Is Said to Believe Trump Has More Documents – New York Times

• The Economy Sure Doesn’t Look Like It’s in Recession (Yet) – Catherine Rampell, Washington Post
• The Labor Market Is Slowing — It Could Just Be the Beginning – Abha Bhattarai, Washington Post
• The Too-Hot-for-Comfort Job Market – Neil Irwin, Axios
• How the Fed Is ‘Shaking the Entire System’ – The Ezra Klein Show, New York Times
• Tracking the Coming Economic Storm – Paul Krugman, New York Times
• Why Defunding IRS Auditors Won’t Be Easy GOP Promise to Keep – Tobias Burns and Mike Lillis, The Hill
• Republicans Have a Lot to Fear in November – Ramesh Ponnuru, Bloomberg
• Think You Already Know Crazy? Meet the House GOP Class of ’22 – Dana Milbank, Washington Post
• Liz Truss Displays Limousine Conservatism – Henry Olsen, Washington Post
• Britannia Unhinged – Paul McNamara, Financial Times