This podcast episode discusses the surprising surge in hiring by state and local governments, which is challenging the Federal Reserve's efforts to combat inflation. Despite interest rate hikes, government expenditure, which accounts for 36% of GDP, continues to drive job growth, raising concerns about the labor market's responsiveness and the rising cost of living. At the same time, the federal funds unleashed during the pandemic have enabled local governments to make savvy investments in infrastructure and services, such as education and healthcare, creating a temporary boost to the economy. However, the question remains whether this hiring spree masks underlying economic weaknesses and whether it is sustainable in the long run.
