"soft landing" is a hope but if bringing the labor market under control ( higher unemployment ) requires a hard landing or recession the FED is prepared and willing to do that. The whole concept of a soft landing is "well that would be nice but it's not the priority".
This is wrong. The Fed doesn’t want higher unemployment. It isn’t even willing to tolerate it. That’s the whole “soft landing” conversation, and why cuts are so cautious.
The ideal path would be labor market loosening with no more unemployment. Absent structural adjustments, that’s possible. But we need structural adjustments, so layoffs are necessary, which makes the closest to ideal layoffs and immediate reuptake, i.e. constant employment with less wage growth.
No, they want less nominal wage growth. The less people lose their jobs, the better. But economies don’t adjust without creaking, which means yes, an expected effect is layoffs and bankruptcies. But the Fed doesn’t want that, and goes to significant lengths, often with negative impact on its price-level mandate, to manage this downside.
Softening of labor conditions is pretty directly saying "Increase unemployment".
> and why cuts are so cautious.
They're so cautious because they want to hit the right amount of increased unemployment, not that they don't want unemployment to go up at all.
Not at all. It means less nominal wage growth. That can and does happen without an increase in even job losses, let alone unemployment. (You can have job losses with constant or even increasing employment.)
It’s literally what we’re seeing right now. It’s not the norm, but it’s precedented[1], most recently in America in the 90s.
Also job numbers have been incredibly good so it's not even generally true unemployment is increasing outside of sectors that are incredibly susceptible to fears of recession.
I don't think that is a major difference to someone who is laid off because of intentional decisions that the fed makes to effect an outcome, knowing that layoffs will be a consequence.
The difference between being laid off and having job offers versus going onto a growing roll of the unemployed is major. We're not seeing a meaningful increase in unemployment [1][2].
The best I can understand it, the low interest rates encourage lending / borrowing, which expands the money supply. As the supply of real goods and services is not keeping up, theres more money than goods, so prices of everything go up.
Layoffs are a way of keeping wages down, but that's just corporate greed. If wages went up, it would effectively negate inflation - we'd just get extra zeros on everything, but individual purchasing power would stay on par (you could still pay your rent with half a paycheck, etc).
Of course in a global economy that would cause the country to be at a disadvantage in the import/export game.
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