Tuesday, March 23, 2021

Full Employment

We had decades of Fed policy which was basically "make sure that nobody ever gets a raise."
In 2015, when Janet Yellen was chair, the central bank raised interest rates — a move justified at the time by the prevailing belief that at 5 percent unemployment we were close to full employment and that inflation would arrive soon after if rates stayed low. Mr. Powell and all of the other members of the Fed’s committee at the time, agreed. In retrospect, it was too soon. American families — who could have greatly benefited from a tighter labor market that produced higher wages and more opportunities — suffered. It wasn’t intentional, but that’s cold comfort to families who missed out on a full recovery.
Trump did one thing right, perhaps ending 35 years of the Fed policy of making sure that nobody ever gets a raise again.
Politicians promise their policies will creeeaaatte jayuuuuuuubs. Journalists judge policies by imagined (usually based on supply side fairy reasoning) jayyyuub creation of those policies. The Fed raises rates as soon as too many jayuuubbs are created, ensuring that not enough jayyyuuubs are created to ever give anybody a raise.

Nobody ever seems to recognize the contradiction here.