With help from Lisa Kashinsky
THE END (MIGHT) BE IN SIGHT — Rep. Kevin McCarthy flipped 15 detractors in his hunt for the speakership today, but fell just short of being elected — for now. The House is adjourned until 10 p.m. EST this evening.
The six Republicans who remained opposed to McCarthy throughout the day were Reps. Andy Biggs (Ariz.), Lauren Boebert (Colo.), Eli Crane (Ariz.), Matt Gaetz (Fla.), Bob Good (Va.) and Matt Rosendale (Mont.). If McCarthy can keep the rest of his conference together, he only needs two more flips from the remaining six to secure the speakership, assuming all House members are voting.
WELL-BALANCED — You wanted the perfect Goldilocks jobs report — not too hot, not too cold? Well, you pretty much got exactly that in December with hiring still quite strong at 223,000 but slowing down a bit with wage gains easing.
The jobless rate ticked back to a forty-year low of 3.5 percent, the Labor Department said today, as nearly half a million Americans returned to the labor force.
That means, at least for the moment, that the fabled and rarely achieved economic “soft landing” — in which the Federal Reserve’s campaign of rate hikes cools off inflation but doesn’t tip the economy into recession — is still very much a possibility, if a fairly narrow one.
And the new economic conventional wisdom that any recession would probably be short and shallow looks like it could actually be correct. To be clear, a foam-the-runway style, fiery crash landing remains quite possible. But as the new year begins, it’s no longer fashionable to be an economic doom-and-gloomer. And with pretty good reason.
Just look at the numbers. Job gains are now at their lowest point in two years as the flood back from Covid runs its course and Fed hikes start to pinch businesses and limit hiring plans. But they are still quite strong. That’s great from a Fed perspective.
And the central bank’s biggest concern, a wage-price inflation spiral in which ever-rising compensation forces companies into more and bigger price hikes on consumer products, does not appear to be happening. The Fed — and American workers — love wage gains. But not if they run out of control and drive up overall consumer inflation.
And in December, wages ticked up 0.3 percent on a monthly basis, less than what Wall Street forecast. Wages are now up 4.6 percent on an annual basis, down from a March peak of 5.6 percent. In the short term, this is rough for workers as it now means their pay hikes are again being entirely eaten up by inflation.
Still, it’s good news for the Fed. Chair Jerome Powell and his central bank colleagues can now point to some pretty concrete signals that the hot labor market is finally cooling a bit. While still high, wage gains are slowing down, which is exactly what the Fed wants to see. And nearly half a million Americans rejoined the workforce in December, perhaps a signal that depleted Covid-era savings are finally forcing people back into jobs.
That good news for the Fed could lead to a smaller rate hike of just a quarter point next month. And that, in turn, meant good news for Wall Street, with all major averages jumping around 2 percent on the news. Big Wall Street banks are mostly no longer calling for an imminent recession, though risk levels remain high.
Instead, what appears to be happening at the moment is the American economy is very slowly starting to resemble what it was before Covid: slow growing, plagued by inequality and other systemic issues but generally… basically pretty OK.
The “Goldilocks” analogy — cliche though it is — dripped from nearly every economist’s lips today. And the report came as strong news for Democrats and President Joe Biden as their argument — that the president’s big fiscal and social policy wins from the last two years will help avoid recession — now appears to have some more merit.
But, but, but … and you knew this bit was coming. It’s not like a soft-landing is a lock, or the economy is fully healed from Covid. There are already significant layoffs in the interest rate sensitive technology and financial services sectors as companies prepare for a Fed-dampened economy. Temporary help has fallen by 110,000 over the past five months. New orders for manufactured goods dropped by 1.8 percent in November, the Commerce Department said, well above the expected decline.
“The third straight hefty drop in temp hiring, down 35,000, is an ominous sign,” Pantheon Macroeconomics’ chief U.S. economist Ian Shepherdson wrote in a client note today. “We think substantially slower payroll growth is coming very soon.”
And a business survey on activity in the services sector showed a decline in December for the first time since early in the pandemic. The labor force is still 2.6 million people smaller than it was before the pandemic. And it was already way too small. That means continued pressure on wages until more people get back to work.
While encouraging for the Fed, wages are still growing faster than they would like — as is overall inflation. If current trends don’t continue on inflation, the central bank will absolutely err on the side of sparking recession with more big hikes. So keep the cigars unlit for now.
HOUSE GRINDS TO A HALT — The House must select a speaker before swearing in members or passing a new set of chamber rules and the paralysis affects lawmakers, staffers and constituents alike. Here are four ways the turmoil has disrupted normal operations.
Security clearance: Lawmakers still don’t have the clearance needed to take classified briefings with intelligence, military and senior administration officials on an array of sensitive issues. Reps. Mike Turner (R-Ohio), Mike McCaul (R-Texas) and Mike Rogers (R-Ala.) issued a joint statement criticizing the turmoil for hindering their ability to perform White House oversight.
Staffer pay: According to guidance provided by the House Administration Committee, if by the end of Jan 13. a rules package has not been adopted, “no committee will be able to process payroll” since authority would rest in the new Congress. That disrupts payment for staffers as well as the processing of student loan forgiveness programs for House employees.
Constituent casework: Several lawmakers have said some federal agencies have been unable to process casework until the new Congress is officially sworn in. That puts a dent in everything from renewing passports, updating tax information and applying for federal benefits. One GOP staffer told POLITICO’s Olivia Beavers they are “not sure people realize the non-political ramifications this has on our ability to help folks.”
C-SPAN gone wild: While the majority party typically imposes strict rules on the kinds of shots that can be filmed, procedures are peeled back for special events like the election of House speaker. As the drama unfolds, C-SPAN has deployed roaming cameras filming whatever and wherever they like. The shots offer rare glimpses into high-stakes negotiations served directly to the public.
THE LONG SHADOW — Today marks the two-year anniversary of the January 6, 2021 attack on the Capitol. House Democrats gathered on the steps of the Capitol to commemorate the day, joined by only one Republican, Pennsylvania Rep. Brian Fitzpatrick. Nightly compiled stories that are worth reading to understand the day and its legacy:
— Covid cases, hospitalizations spike as new variant gains foothold: Covid-19 cases are spiking as a new variant, which may be the most transmissible yet, spreads across the country. Roughly 6,500 people in hospitals in the U.S. have tested positive for Covid-19, according to the CDC, more than double the number from one month ago, and more than 10,000 people have died from Covid in the last month, the highest four-week total since the summer.
— Miami Democrats face internal feud after disastrous 2022 midterms: The 2022 midterms saw Republicans win Miami-Dade County for the first time in 20 years. Now, the Democratic infighting has begun. Ten party officials in Florida’s most populous county are asking the statewide Florida Democratic Party to audit the county party over alleged campaign finance “improper activity.” The request comes after Republicans won nearly every race in the county, which Hillary Clinton won by nearly 30 percentage-points just six years ago. The county has long been held up as an overwhelming Democratic home turf.
PEDDLING PROPAGANDA — Latvia’s intelligence services arrested Latvian national Marat Kasem, the editor-in-chief for the Lithuanian edition of Sputnik, the Kremlin-backed news website. He is suspected of “providing economic resources to a Kremlin propaganda resource” under European Union sanctions last Tuesday, the state’s Security Service announced in a statement.
Baltic news outlet Delfi identified Kasem, who has been placed in detention, writes Nicolas Camut.
Both Sputnik and Russia Today (also known as RT) have been banned from the EU since last March after spreading disinformation about Russia’s full-scale invasion of Ukraine. The ban extends to all platforms and the two outlets’ content can no longer be accessed from inside the EU.
“The person is employed at one of the information resources of the agency ‘Rossiya Segodnya’ [Russia Today], which is under the Kremlin control and disseminates narratives in line with the Kremlin’s interests, including regularly discrediting Latvia and its allies,” the statement from the Latvian agency reads.
TRUE CRIME-MANIA — We live in an era where true crime podcasts accounted for 17 percent of those mentioned in year end lists from publications such as Esquire and The New York Times and Netflix’s “Dahmer” saw viewing times exceed one billion, so it’s no secret that serial killers are an entertaining (and profitable) topic for many. What is the root of this fascination with murder? Who is the typical true crime fan and what does their love for the subject really tell us? The Believer’s Sarah Marshall explores these topics through a history lesson on the serial killers of the 70s and 80s and a deep dive into the topic’s current popularity. Unpacking the women’s liberation movement and the way killers are depicted in media such as “Criminal Minds” or “Silence of the Lambs,” Marshall covers all facets of the serial killer phenomenon.
SMOOTH TRANSITION — While a bitterly divided Washington slogs on under the shadow of Jan. 6, Massachusetts Playbook author Lisa Kashinsky writes in to Nightly about a just-completed transfer of power between parties that was almost jarring in its level of civility and collegiality.
After eight years as chief executive, Republican Charlie Baker handed the key to the Massachusetts governor’s office over to Democrat Maura Healey in a ceremonial exchange of gifts this week that ended with not just one hug, but three. The newly elected governor is also keeping one of Baker’s Cabinet secretaries and retaining another as a transition adviser. In her inaugural address Thursday, Healey even vowed to pursue some of the policies — tax relief, chief among them — that Baker failed to get across the finish line.
Solidly blue Massachusetts, of course, doesn’t have a recent history of bitter partisan conflict. (Republicans here are too busy fighting themselves). But the state has a habit of electing moderate Republican governors to balance its Democratic supermajority Legislature.
Baker was in that tradition, a bastion of old-school, centrist New England Republicanism even as his party moved away from it. He left office having been consistently ranked as one of the nation’s most popular governors.
His decision not to seek a third term paved the way for Democrats to retake the corner office and usher in a new era of one-party rule on Beacon Hill. Healey, a progressive former prosecutor who repeatedly sued former President Donald Trump’s administration in her role as state attorney general, has consistently lauded the outgoing GOP governor and sought to ensure a smooth transition.
In December, she surprised Baker by calling into his monthly radio program and thanking him for “his incredible service.”
The first woman elected governor of Massachusetts, Healey’s tenure is starting off as something of an extension of her Republican predecessor. And that’s won her plaudits from Republicans and Democrats alike.
“Charlie did a terrific job as governor. It can’t hurt by taking the best of Charlie and whatever it is that she wants to put her own stamp of approval on,” White House climate envoy John Kerry, a former U.S. senator from Massachusetts who was on hand for Healey’s inauguration Thursday, told reporters. “But I think there will be continuity. I don’t think it’s going to be craziness like we’re seeing down in Washington. Far from it.”
And Healey, addressing reporters from the executive suite for the first time today, said that’s “the way it should be.”
“I hope our state can be an example to others at a time where unfortunately across this country we’ve seen a lot of divisive rhetoric and ugly political discourse, and too many politicians looking to divide and really exploit misinformation, disinformation and even people for their own perceived politician gain,” she said.
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