Does the Fed need layoffs to cure inflation?

Is the Federal Reserve silently rooting for layoffs to help its battle with stubbornly high inflation?

Well, let’s just peek at inflation rates and how they vary in a curious collection of 23 metropolitan areas tracked by the Consumer Price Index. My trusty spreadsheet tells me that places with high inflation rates also happen to have strong job markets.

Remember that the Fed has two goals – keep employment high and inflation low. When cost-of-living increases hit levels not seen in four decades last year, the central bank deployed its key tool – surging interest rates – in an attempt to cool an overheated economy. It’s a less-than-subtle wink at bosses to slow hiring – at a minimum.

Geography helps us see the Fed’s challenges in taming inflation. Mull over these 23 local economies, sliced into two groups ranking their latest monthly cost-of-living increases.

You have high-inflation towns – Miami, Tampa, Phoenix, Seattle, Detroit, Atlanta, Dallas, Denver, Baltimore, San Diego and Chicago. Prices are rising 5.8% a year, according to this group’s median inflation rate.

Then there are the places with lower inflation – Boston, Philadelphia, the Inland Empire, San Francisco, St. Louis, Houston, Los Angeles-Orange County, New York, Washington, Minneapolis, Honolulu and Anchorage. Inflation runs 3.9% for these laggards.

Please note the size of this geographic pricing gap. One-year increases in the local cost of living indexes run from 9% in Miami to 3.1% in Anchorage.

So there are substantial inflationary differences here.

The geography

Now consider the varied economic performance in these 23 job markets.

For starters, think about unemployment among these two groups. The high-inflation metros had a median 2.9% jobless rate, with Miami ranking the best at 2.2%. Low-inflation towns had 3.5% median unemployment, with Los Angeles-Orange County at the bottom with a 4.6% rate. More jobless: less inflation.

Next, eyeball the hiring pace over the past 12 months. The median job growth in high-inflation metros was 3.3%, with Dallas tops at 5.1%. Compare that with 2.4% job growth in low-inflation regions – the Inland Empire was at the bottom with a 0.3% rate. Less hiring: less inflation.

Or ponder one-year increases in weekly wages. The median raise was 2.4% in high-inflation metros, with 10.7% in Houston (No. 1). Contrast that with a 1.5% median pay hike in low-inflation regions – with a drop of 0.8% in Boston, the group’s worst. Smaller raises: less inflation.

Strong local economies likely have more folks with flush wallets. Those are the people who can afford to pay up for goods and services. That’s a key ingredient for a surging cost of living.

Similar geographic lessons exist within the four California metros tracked by the CPI.

San Diego County’s got the highest inflation at 5.3% but also the strongest economy with a 3.7% unemployment rate, 3.3% for job growth and 2.3% pay hikes.

Contrast that to the Inland Empire, with 4.6% inflation along with 4.5% unemployment, 0.3% job growth and 1.3% raises. Or San Francisco, where 4.2% inflation comes with 3.4% unemployment, 2.1% job growth and 0.4% raises. Or in L.A.-O.C., with a 3.8% inflation rate, 4.6% unemployment, 2.5% job growth and 1% raises.

The cure

To be fair, inflation is cooling.

The upswing in the nationwide CPI has moderated for 10 straight months. April’s inflation rate was 4.9% vs. 9.1% in June 2022.

However, 4.9% isn’t acceptable. Other price measures tell a similar tale. So what secret sauce will fully tame prices?

Now Fed chairman Jerome Powell insists surging layoffs are not required to solve the inflation puzzle.

“We actually don’t think that we need to see a sharp or enormous increase in unemployment to get inflation under control,” he recently told Congress.

Call me skeptical because few options remain.

Price-pumping product shortages early in the coronavirus economy are largely bad memories today. The pandemic era’s economic stimulus put cash in people’s pockets and those efforts are complete. The Fed’s cheap money policies, part of that economic fuel, have been reversed.

Yet hiring and raises remain robust. As does inflation.

It’s a tough call. Layoffs affect relatively few, but the cuts are felt deeply. Inflation hits us all.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at

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