Jerome Powell recently admitted that fighting inflation will lead to higher unemployment. Powell admitted that in order to establish price stability, the labor market will have to suffer a severe blow. “I would say that, if I were to bring inflation, SAI, down towards 2% and the unemployment rate went up to 4.1%, this is still a historically low level. We hadn’t seen – we hadn’t seen rates, unemployment rates below 4 percent until a couple of years ago because we had seen it for like a year in the past 50. So, the idea that 3.6 percent is historically low in the last century. So, an unemployment rate of 4.1% with inflation approaching 2%, I think it would be, I think it would be a positive result.. So, we are not trying to have a higher unemployment rate, but I would say that I would definitely consider that a positive resultPowell admitted.
The Fed chairman said they “would love” to get back into the job market we experienced before the pandemic when unemployment was at an all-time low of 3.5% and wage growth outpaced inflation. This is just a dream. “We are not, again, we are not, we don’t try to put people out of work, of course, we never think too many people work and fewer people need a job, but we also think you can’t really get the job. kind of job market we want without price stability, ”he admitted The pandemic and COVID restrictions have ruined the US job market for many years to come.
Former Treasury Secretary Larry Summers recently delved into the subject, but was more blunt with his message. “We need five years of unemployment above 5% to contain inflation, in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 6% unemployment. 10%, ”Summers said speaking in London.
This would indicate an immediate 1.4% decline in employment in the coming months to the low end of his estimate. Another 75 basis point rate hike is not out of the question for July as the Fed has become aggressive in reversing its failed policies. Regardless, the US workforce is expected to take a hit in the near future due to fiscal and political mismanagement. The cost of basic necessities is rising, housing is inaccessible, and countless people will lose their jobs. The worst is yet to come.