Former U.S. Treasury Secretary Lawrence Summers believes Friday’s jobs report is a huge miss from the consensus and the labor market is running very different than lots of other indicators in the economy that are showing some signs of real slowing.

What Happened: “One idea would be that people are still worried about how much work they are going to get out of their workforces given people are working at home, given increased absenteeism, given a variety of post-Covid changes. And so they just feel that whenever they can get workers, they should take the opportunity,” he told Bloomberg TV. 

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Hot Market: The Labor Department reported the U.S. economy added 517,000 jobs in January, far exceeding economist estimates of 187,000 new jobs. Wage growth dropped to just 4.4% in the month while the unemployment rate hit a 50-year low of 3.4%.

Summers noted it seems there are a lot of workers relative to the amount of demand or production in the economy. “And the question is, is all this going to be income that's going to be spent, that is going to lift the economy up a bunch, is it going to turn out that at some point people realize they have got too much inventory and labor and we are going to see a fairly sudden stop,” he said.

Summers also said it is important to maintain a lot of agnosticism about the future path. “I do still think there is the risk of a kind of a Wile E. Coyote moment where firms realize they have got too much inventory and too many people,” he said.

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Photo: International Monetary Fund on Flickr