Weekly Wrap: Americans have worked longer, but they haven’t gotten any smarter.

Welcome to Friday! This is a digest of recent economic and financial events. We’re taking a look at what happened over the past week, keeping it straightforward and to the point.

This week, the Labor Department reported that while Americans worked as expected last quarter, their productivity didn’t match the effort. Employers seem hesitant to lay off workers in the current tight job market, which has left some Republicans dissatisfied—possibly fueled by rising oil prices. Additionally, Federal Reserve officials are hinting at raising interest rates, suggesting that higher gas prices could be a factor.

Unproductive Revisions

According to data from the Bureau of Economic Analysis and the Department of Labor, American productivity actually dipped slightly at the end of last year—more than previously estimated. Even though hours worked remained stable, output didn’t live up to earlier predictions. The growth rate for productivity was revised down from an initial 2.8% annually to just 1.8%, while unit labor costs increased. So, it seems people weren’t getting as much done as expected.

Now, that’s a bit harsh. Most individuals were doing just fine, and I mean, 1.8% per year isn’t bad at all. But who really caused this decline? Well, it’s somewhat related to healthcare workers. The drop in output in the healthcare sector stemmed from fewer patients needing serious care. With mild seasons for flu and other illnesses, doctors and nurses had less to tend to, which impacted overall productivity and GDP figures.

It’s a good thing fewer people are seriously ill, but it’s also a reminder that some positive trends can affect economic growth too.

This is What Full Employment Looks Like

Despite all the chatter about the economy’s state, the job market looks quite good. The four-week average of new unemployment claims dropped to 205,000, marking a historical low that hasn’t been seen in decades. When adjusted for workforce size, layoffs are at a record low.

This tells us that Americans are, in a way, enjoying a period of remarkable job security, which is typically only found during economic recoveries. The fact that the economy is now in its sixth year of growth is something unusual.

A significant factor? Immigration policy. The Biden administration’s strategy has led to around 3 million foreign nationals entering the U.S. workforce each year. Meanwhile, the number of people leaving—either voluntarily or through deportation—remains low. This situation means that employers need to value their employees more, particularly since a milder flu season has resulted in less work for healthcare professionals.

Republican Optimism Shaken by Iran War

Many readers are justifiably skeptical of polls, as they often underestimate support for certain political figures, leading to a distorted view of approval ratings and economic sentiments. Recent shifts in public opinion illustrate how the Iran war has undermined economic optimism among those aligned with Trump. A poll taken back in February revealed that 62% of “MAGA supporters” believed the economy was improving, but that number has slipped recently, with only 51% maintaining the same belief this week.

This isn’t a drastic change, though. It shows a slight loss of faith in the economic outlook, with more people shifting to viewing conditions as stagnant rather than improving. A week ago, those figures were even less optimistic.

One possible reason for this shift could be the surging oil prices, previously at around $110 per barrel. Gas prices are now nearly $4 a gallon, which is a stark contrast to rates seen earlier in Biden’s term. Nevertheless, many remain hopeful, and a Gallup poll found that only 35% of Americans are seriously worried about energy prices, down from 47% a year ago.

Interestingly, despite rising gas prices, just 2% of Americans report those prices as their biggest concern, according to Gallup.

Fed Officials Concerned About Oil Markets

As it stands, approximately half of the discussions around energy are connected to the Federal Reserve, while the other half revolves around bond traders. After some hawkish remarks from Fed officials this week, the market started recalibrating for potential rate hikes rather than cuts. By Friday, the chances of a rate increase by year’s end climbed to over 50%.

Although gas and oil prices have been restrained, other commodities, like natural gas and certain fertilizers, pose a potential risk due to market shocks. The larger concern here is if the Fed raises rates in response to these supply shocks, which could backfire, leading nowhere beneficial in terms of managing inflation.

Raising rates now may not ease the ongoing pressures on the economy that were recently exacerbated by global events. The possibility of a significant rate hike doesn’t seem to fit into the current framework of expectations.

Andrew Jackson’s Condemnation

On this day in 1834, the U.S. Senate formally condemned President Andrew Jackson. This clash was part of a broader conflict between populist leaders and the financial elite. Jackson had previously vetoed the rechartering of the Second Bank of the United States in 1832 and ordered federal funds to be withdrawn from the bank.

Opponents, including Henry Clay, labeled him as a “frontier Caesar,” accusing Jackson of wielding unapproved powers. Jackson, not one to back down, took exception to these claims. In reaction, he rallied his allies to eventually reverse this condemnation when the Democrats regained control of the Senate in 1837.

Interestingly, it has since been noted that Jackson’s main regret upon leaving office was that he couldn’t deal directly with Henry Clay. It’s worth mentioning that the Senate hasn’t formally censured a sitting president since that time.