WHEN WHITE FOLK CATCH A COLD...

Expect the FED to raise its benchmark interest rate at its September meeting. By the time they "finish the job" we could be in a recession, with the least advantaged catching the brunt of the downturn

Almost a week ago, the folks at the Bureau of Labor Statistics (BLS) released it's much anticipated inflation report. The Report's top line number is that the Consumer Price Index (CPI) is now rising at an annual clip of 8.3%. In just the last thirty days, according to the BLS, the CPI increased .1%.

Folks in the know had been predicting that the CPI would clock in at or around 8.1%. The fact that it came in higher than that fueled the fear that inflation is still very much a thing, and that the job of taming that beast has yet to be fulfilled.

What's more, the nation's "core" inflation rate continues its climb. The "core" rate, by the way, excludes such volatile categories as food and energy. The thinking here is that, in order to get a grip on what's really going on with the underlying price level, you have to exclude the "background noise" generated by items that are known to jump around a lot.

Again, the core is supposed to yield a more accurate picture of the direction of the underlying trend in prices and figures prominently, for instance, in the assessment of inflation by many economists, traders, and folk at the Fed.

So, what's going on with the core? Well, according to the recent inflation Report, it's increasing at an annual rate of 6.3%-- and between the months of July and August, the core's rise picked up speed, doubling from .3% to .6%.

All of this spooked the markets and, one day after the Report, blaring across all media came the news of market meltdown: The Dow dipped 3.94%, the S&P slipped 4.32%, and the Nasdaq nose-dived 5.16%. These drops brought the recent stock rally to a screeching halt.

All in all-- and this bears repeating-- inflation is indeed still a thing and, as mentioned above, the job of getting it under control is yet to get done.

THE FED'S COMMITMENT TO FINISH THE JOB

On August 26th, Jerome Powell--chair of the Federal Reserve-- delivered an important speech at Jackson Hole, Wyoming.

Powell took the time to reiterate that the FED was determined to engage in an all-out assault against inflation. The Fed, said Powell, took its mandate to promote price stability seriously and that they--the Fed-- was committed to getting inflation back down to 2%-2.5% level. Here's what came out of his own mouth:

Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation.

You catch that talk about "softening of labor market conditions," bringing "demand and supply into better balance," and causing "pain to households and businesses?"

Well, I hope so because what Powell is actually saying is this:

Getting inflation down to, say, 2%-2.5%, may cause joblessness to increase, wage growth to cease, and some businesses to possibly fall by the wayside.

What Powell is saying is this:

Slamming on the brakes-- that is, jacking up interest rates to slow down demand and cool stuff off-- may have the "unfortunate" result of ejecting a passenger or two from the "vehicle."

Now, don't get me wrong. I don't think Powell is actually trying to create a recession. He'd prefer what he has been calling a "soft landing," that is, wringing the how rate of price increases out of the system without damaging economic livelihoods.

At the same time, though, he's making it abundantly clear that economic pain, that increased joblessness, that financially strapped and stressed families may be the inevitable collateral damage if the war against inflation requires a prolonged fight.

In that Jackson Hole speech, Powell doesn't hold back, doesn't mince any words-- the Fed is determined to keep raising their benchmark interest rate until they see consistent evidence that inflation is on the run.

The fight has begun, and Powell--as they say-- is in it to win it. The Fed is committed to getting the job done.

As he put it in his Jackson Hole speech:

"We will keep at it until we are confident the job is done."

BAD NEWS FOR US

The FED's commitment to keep at it until the job is done is not exactly good news for workers in general and Black and Brown workers in particular.

It's bad news for us because it runs the risk of pushing the economy into a recession, and there's plenty of research indicating that Black folk tend to get hit first and the hardest in an economic downturn.

For instance, a recent paper by a group of economists examines the impact of changes in the aggregate or overall unemployment rate on the economic status of different racial/ethnic groups. What they found was that a change in the aggregate unemployment rate had a particularly pronounced impact on the Black unemployment rate. More specifically, they found that every one percentage point increase in the aggregate unemployment rate was associated with a jump of 1.8 percentage points in the Black unemployment rate. For Whites, on the other hand, a one percentage point increase in the aggregate unemployment rate was associated with a .4 percentage point increase in the White unemployment rate.

Any policy strategy that results in an increase in unemployment will hurt all groups but we're the ones who're really going to get slammed. Or, if it helps, put it the way the old heads used to:

When White folks catch a cold, Black folk be coming down with pneumonia.