Macro and Markets
Healthcare policy interventions could provide downward pressure on core PCE both in 2022 and in the years ahead. Given the salience of inflation, disinflationary healthcare policies should be a key priority for Congress and the Biden Administration alike.
Given the Fed’s recent framework revisions and forward guidance commitment to maintain current interest rates until “maximum employment” is achieved, the Fed’s communication with respect to its assessment of “maximum employment” is overdue for a clarification.
This post is the first in a series that uses the history and economics of the American semiconductor industry to ask big picture questions about the future of fiscal policy and industrial policy.
Commentary about the Biden administration’s proposed fiscal relief policies has relied heavily on estimates of the economy’s potential output. However, few commentators or policymakers look under the hood to check how these estimates are calculated.
The Framework Review and Forward Guidance center labor market outcomes over inflation in evaluating interest rate policy. However, the Fed haven't clarified how they will evaluate inflationary dynamics under the new regime.
While The Shock may have ended, labor market indicators suggest that we still need to respond appropriately to The Slog if we are to avoid a repeat of the lackluster “jobless recovery” following the 2008 crisis.
Between mid-February and mid-March, the number of Americans unemployed grew by 1.4 million. But the rise in Americans reporting any type of labor market disruption — absence, wanting more hours, or not having a job at all — was almost four times that number: 5.6 million.
The coronavirus shock will lead to a dramatic spike in the unemployment rate. But even this surge could understate the true labor market damage from the virus.
The impact of COVID-19 is likely to be sizable. Regardless of the precise composition of the shock to supply and demand, further macroeconomic policy action is now necessary.
