The Federal Reserve's interest rate decisions shape the economic landscape, influencing borrowing costs for everything from mortgages and auto loans to business investments. These policy changes directly affect whether businesses expand operations, invest in equipment, or increase staffing. At Employ America, we research how the Fed can better balance its dual mandate, advocating for approaches that prioritize achieving and sustaining full employment while utilizing more targeted tools to address inflationary pressures.
Monetary Policy
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59 Posts
In our previous piece in our vacancies series, we took a deep dive into Ball, Leigh and Mishra (2022), “Understanding U.S. Inflation During the COVID Era,” a paper presented at the Brookings Papers on Economic Activity Conference in September 2022. The paper, which warned that the Fed’s...
Jan 25, 2023
The Fed is arguing that inflation is driven by the cost-push impacts of wage growth on service prices. This is a traditional view, but the pandemic recovery has been anything but textbook. In our view, the primary nexus is a demand-pull relationship. The core question for the Fed ought to
Jan 09, 2023
Though they may proclaim otherwise, the Fed is aiming for a recessionary labor market. They might not succeed, they might change their minds, but buried in the Fed’s latest projections is a definite–albeit obscured–statement of intent.
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Oct 31, 2022
Summary 1. Friday's Q3 ECI release showed a modest slowdown in the pace of wage growth. Coupled with what we already knew about Q3 employment growth, we are continuing to see a slower—though still highly respectable and resilient—pace of gross labor income growth (~6.1% annualized
Oct 21, 2022
This is the second piece of our vacancies series. In this piece, we refute specific vacancy-backed arguments that the Federal Reserve will need to engineer a recession in order to bring inflation under control.
Just as housing unit completions began to pick up in May, the pipeline of new housing units has already begun to fade. Builders are getting rationally spooked by tighter financial conditions and its real economic implications. While higher mortgage rates reduce the demand for investment (a new housing structure), higher
Tightening global financial conditions may serve to reinforce policy tightening, and the Fed should be cognizant of the risk that hikes may have a stronger-than-expected impact in this period of elevated uncertainty.
Apr 11, 2022
A CPI pre-read, wherein we argue the Fed should be calibrating its tightening efforts to what current conditions are indicating.
Commentators across the ideological spectrum have argued that inequality justifies a more hawkish path for monetary policy. These arguments miss the fact that interest rate policy primarily slows consumer spending and consumer price inflation by slowing down the labor market first.
