From Breakingviews - Bottling U.S. inflation could cost workers dearly
Chair Jay Powell has stuck by his mission even as higher borrowing costs have squeezed households’ finances. Their spending fell in December by the most since February 2021, the U.S. Bureau of Economic Analysis said Friday. Nonetheless, markets expect the central bank to raise rates on Wednesday and again in March, according to economists polled by Reuters.Projections
published after the Fed’s December meeting suggest the view that by the time inflation returns to 2% in 2025, unemployment will have risen to 4%, from 3.5% in December. That’s equivalent to 800,000 people being put out of work. The number rises, though, if people who left the workforce and stopped job-hunting during the pandemic come back into the fray. Assume the participation rate – or the share of Americans working or actively trying to – returns to where it was at the end of 2019, and that 4% unemployment would mean a total increase of 978,000 jobless people.
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