Is US Unemployment About to Rise?
- By Sam van de Schootbrugge
- 7 min read
Summary
- A new Peterson Institute for International Economics policy brief revisits the relationship between vacancy rates and the unemployment rate.
- It finds when vacancy rates drop, as now, the unemployment rate always increases. This means the Fed’s goal of reducing labour market tightness without increasing unemployment is highly unlikely.
- The paper also estimates the natural rate of unemployment, which they found has increased from 3.6% to 4.9% during the pandemic. So, to dampen wage and price inflation, the Fed will need a relatively large increase in the unemployment rate.
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