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A month after forecasting a then-uber-bullish unemployment rate of 3.5%, Mark Zandi, chief economist at Moody's Analytics, is going further — if the Fed maintains its current pace of interest rate hikes, he says, joblessness could plunge as low as 2.5% by the summer of next year.

Expand chart
Data: Bureau of Labor Statistics; Chart: Axios Visuals

Why it's a big deal: If that happens, it would match the lowest U.S. jobless rate since the government began tracking the figure in 1948. The precedent is two months in 1953—May and June—when the number was also 2.5%. "That was in the middle of the Korean war," when hundreds of thousands of Americans were fighting abroad and not in the work force, Zandi tells Axios.

The understory: Zandi's model is built on numbers provided by ADP, the payroll processing firm, which reported today that the economy produced 235,000 jobs last month, higher than forecast. ADP produces its report ahead of the Bureau of Labor Statistics, which will release its February figures on Friday.

  • If the economy keeps churning out jobs at the rate of about 200,000 a month — which Zandi expects — unemployment will plunge from the 4.1% reported in January, and below 3% next year, he said.
  • The labor force is growing at only about 100,000 jobs a month, which is why the higher job production rate is eating into unemployment.
  • Jobs growth could even accelerate because of the combination of President Trump's tax cuts and expected government spending, Zandi said.

But but but ... wages are also rising across the country, which will register in the economy as inflation, especially as interest rates tick up.

  • Guy Berger, chief economist at LinkedIn, tells Axios that a large chunk of the hiring is pulling not from the ranks of the unemployed, but poaching from other companies. "People are leaving their jobs for another opportunity," he said.

Go deeper

Updated 55 mins ago - Politics & Policy

House passes George Floyd Justice in Policing Act

Photo: Stephen Maturen via Getty Images

The House voted 220 to 212 on Wednesday evening to pass a policing bill named for George Floyd, the Black man whose death in Minneapolis last year led to nationwide protests against police brutality and racial injustice.

Why it matters: The legislation overhauls qualified immunity for police officers, bans chokeholds at the federal level, prohibits no-knock warrants in federal drug cases and outlaws racial profiling.

3 hours ago - Politics & Policy

Senate Republicans plan to exact pain before COVID relief vote

Sen. Ron Johnson. Photo: Stefani Reynolds/Bloomberg via Getty Images

Republicans are demanding a full, 600-page bill reading — and painful, multi-hour "vote-a-rama" — as Democrats forge ahead with their plan to pass President Biden's $1.9 trillion COVID-19 relief package.

Why it matters: The procedural war is aimed at forcing Democrats to defend several parts the GOP considers unnecessary and partisan. While the process won't substantially impact the final version of the mammoth bill, it'll provide plenty of ammunition for future campaign messaging.

The new grifters: outrage profiteers

Illustration: Sarah Grillo/Axios

As Republicans lost the Senate and narrowly missed retaking the House, millions of dollars in grassroots donations were diverted to a handful of 2020 congressional campaigns challenging high-profile Democrats that, realistically, were never going to succeed.

Why it matters: Call it the outrage-industrial complex. Slick fundraising consultants market candidates contesting some of their party’s most reviled opponents. Well-meaning donors pour money into dead-end campaigns instead of competitive contests. The only winner is the consultants.