Unemployment Isn’t What It Used to Be

By Neel Kashkari, President of the Federal Reserve Bank of Minneapolis,
from The Wall Street Journal,

The low rate doesn’t take account of low labor-force participation. Wages are a better indication of slack.

The U.S. economy, fresh off another strong report, has created an average of 205,000 new jobs a month in 2019, far more than the roughly 100,000 needed to keep up with population growth. The official unemployment rate has fallen to 3.6%, the lowest in 50 years. Historically, such low unemployment has signaled that the economy is at full capacity, which causes wages and inflation to accelerate as employers compete for scarce workers. Yet wage growth has increased modestly, to about 3% a year, and inflation is still running at 1.5%, below the Fed’s 2% target. What’s going on?

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