“We had an honest-to-God blockbuster positive surprise of a job report. Hopefully, it’s a sign that we are getting back to something like normal,” Goolsbee said in a phone interview.
Friday’s report showed the United States added 467,000 jobs in January, dwarfing fears from the White House and some Wall Street banks for an Omicron-fueled decline in payrolls.
Goolsbee, who chaired the Council of Economic Advisers during the Obama administration, said the report opens the door to the possibility that by the summer the jobs market could get back to pre-Covid levels.
He added that the numbers signal the Fed has plenty of room to lift interest rates off zero in a bid to cool off red-hot inflation.
“The prospects they can do that without tanking the economy just went up,” Goolsbee said, adding that it would be a “total positive” if the Fed can finally move rates away from zero.
The jobs report also showed, however, that wage growth accelerated in January. While that is good news for workers grappling with the high cost of living, if sustained it could raise concern about a wage price spiral that entrenches high inflation in the economy.
Yet Goolsbee, now an economics professor at the University of Chicago Booth School of Business, noted wages are not rising as aggressively as consumer prices are.
“This doesn’t look like a wage price spiral to me,” he said, adding that productivity growth has been strong.
Asked how economists got the jobs report so wrong, Goolsbee said many assumed workers who were sick with Covid would show up as big negatives in payrolls.
“It just went differently,” he said. “It’s very rare that you get surprises like this.”
Goolsbee compared it with his experience in the White House in 2009 where after many months of massive job losses, payrolls finally went positive. “It was unexpected and people were thrilled,” he said.
Despite the fact the United States added a record 6.6 million jobs during President Joe Biden’s first year in office, consumer sentiment and Americans’ views on the economy remain low.
Goolsbee blamed the disconnect in part on Covid fatigue and high gas prices.
“If they got control of the virus, I think people would be feeling better about the economy,” he said.
But Goolsbee also pointed to how “partisanized” society is today, compared with the Morning in America era of the 1980s
“When Trump is the president, you have a bunch of Democrats who won’t say the economy is good and when a Democrat is president you have a bunch of Republicans who will never say the economy is good,” he said.