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Educate yourself
Posted on: February 3, 2023 at 13:05:08 CT
Ace AU
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Here's the idea behind why boosting the nation's unemployment could cool inflation. With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows inflation.
"I do anticipate that accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate," Susan Collins, president of the Federal Reserve Bank of Boston, said Monday in a speech. "And I take very seriously that unemployment is painful, and that its costs have been disproportionately concentrated among groups that have traditionally been marginalized."
But some economists question whether crushing the job market is necessary to bring inflation to heel.
"The Fed clearly wants the labor market to weaken quite sharply. What's not clear to us is why," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report. He predicted that inflation is set to "plunge" next year as supply chains normalize.
"I do anticipate that accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate," Susan Collins, president of the Federal Reserve Bank of Boston, said Monday in a speech. "And I take very seriously that unemployment is painful, and that its costs have been disproportionately concentrated among groups that have traditionally been marginalized."
But some economists question whether crushing the job market is necessary to bring inflation to heel.
"The Fed clearly wants the labor market to weaken quite sharply. What's not clear to us is why," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report. He predicted that inflation is set to "plunge" next year as supply chains normalize.
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Educate yourself - Ace A - 2/3 13:05:08