In Fed policy review, labor may finally win out over inflation by hpschneider WorldAtWork
MINNEAPOLIS - At 2.3 percent, Minneapolis’ jobless rate seems impossibly low, even with national unemployment at a 50-year trough.
But it is only recently, deep in the recovery from the 2007-2009 recession, that employers “are recognizing that they can do more, they can do better, and they can be more inclusive.” A series of public sessions around the nation and an upcoming research conference in Chicago may provide the basis for fundamental changes in how the Fed views the interplay of inflation and employment and decides on appropriate monetary policy.
Wages and middle-class incomes have been largely stagnant despite the creation of more than 21 million jobs, and that has upended the Fed’s traditional thinking about the relationship between employment, inflation, and how the benefits of growth are divided between workers and business owners. In an economy driven by consumer spending, that’s the sort of dynamic that has Fed officials worried about long-term growth, and which community advocates say is being felt on a daily basis in their neighborhoods.
One issue is how much policymakers ought to rely on the concept of a non-inflation accelerating rate of unemployment, or NAIRU, an elusive measure frequently debated as the Fed judges whether to raise interest rates.
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