So, do you think that this is stable growth? How do you think the Fed should react? How should we feel about this looking forward?
Friday, April 22, 2016
Jobless claims at 42-year low
I just found this article from MarketWatch.com that discusses how jobless claims have fallen to a 42-year low based on estimates from new applications for unemployment benefits. As we know in economics, unemployment and inflation are a trade-off, but as of late, the inflation rate has been exceptionally low. It doesn't seem right to question a low unemployment rate, but, as we have learned in class, the Fed is supposed to ensure stable economic growth, and this situation almost seems too good to be true.
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I think this is a sign of some of the things that Janet Yellen has been saying about the unemployment rate not being a good indicator of the quality of the economy at this time. Obviously eventually the economy will recover fully and they will need to tighten monetary policy to avoid high inflation, but at this time I think we need to wait for other things such as average wages and people in the labor force to get all the way back before worrying about inflation picking back up.
ReplyDeleteI remember in Econometrics Dr. Apps told us that the Phillips Curve which is the relationship between inflation and unemployment has largely been disproven based on historical precedent.
ReplyDeleteI am with Kenny on this one. I think that the Phillips Curve is based mostly on theory and it hasn't been updated much in recent years. So think it is time to take another look at the alleged trade off between inflation and unemployment.
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