7 ms·

The fed is trying to raise unemployment, not lower it, and the real metric tracked is the unemployment rate, which is not affected by your comment.

kortilla 3y ago
No, the fed has a dual mandate of controlling inflation and keeping unemployment low. They are absolutely not “trying to raise unemployment”. They are trying to control inflation and the expectation is that they will eventually have to stop raising interest rates (or lower them) because unemployment increases too much before they hit their inflation target.
- fauxpause_ 3y ago
  Yes they are. They’re very clear about this. They are trying to raise unemployment as a lever to reduce inflation. That is not to say they want unemployment to rise indefinitely, but they do want it to rise.
  - kortilla 3y ago
    No they are not, they are very clear about this. They will keep raising interest rates until inflation hits their target. They will only stop before that if it starts to drastically impact employment.
  - reducesuffering 3y ago
    Fed mandate is clear: Price stability and low unemployment. Their main lever is interest rates. Interest rate increases do not necessarily increase unemployment. Now that unemployment is low enough, their priority is inflation, and for that they will raise interest rates. If higher unemployment is a side effect that leads to 2% inflation, then their mandate is still achieved. But rest assured, if inflation comes down to 2% with unemployment flat or improved, it's all the better according to them. Their intention is not "more unemployment -> less inflation", it's just "less inflation," by any means necessary. They will accept causing higher unemployment to achieve 2% inflation because it's a balancing act between their two goals. "Powell said he hoped that a slackening of demand might reduce pressure in the labor market without raising unemployment."[0] [0]https://www.bloomberg.com/opinion/articles/2022-07-29/higher-unemployment-is-coming-and-the-fed-should-get-ready?leadSource=uverify%20wall https://www.bloomberg.com/opinion/articles/2022-07-29/higher...
- solumunus 3y ago
  They have said, literally, that they will not stop with rate hikes until unemployment is significantly higher.
  - kortilla 3y ago
    No, they have said, literally, that they will not stop rate hikes until they hit their inflation target. They will also consider stopping if it starts to interfere with their max employment mandate. The critical difference that you are missing is that if inflation stops before employment declines, they will stop raising rates.
Waterluvian 3y ago
I hope they’re trying to lower unemployment. But yes, my flippant comment is mainly just about these kinds of headlines. And a free chance to take a shot at the wrong and bad minimum wages.
- fauxpause_ 3y ago
  They’re trying to raise it.
- ElevenLathe 3y ago
  > I hope they’re trying to lower unemployment. Prepare to be disappointed. They are openly trying to raise it in order to lower "inflation".
MuffinFlavored 3y ago
What's your biggest guess as to why, even with 5% interest rates, they haven't been able raise unemployment yet? How long will they need to hold interest rates at 5%+ before we see a raise in unemployment?
- fauxpause_ 3y ago
  I don’t think interest rates have the capacity to change unemployment right now until they hit some truly emergent effects like a much bigger banking crisis. The US’ economy is not as capital intensive as other economies past.
  - MuffinFlavored 3y ago
    > I don’t think interest rates have the capacity to change unemployment right now I don't know. New + used car sales as well as new 15/30 year mortgages (or what would typically be refinances maybe) have to have some effect. A car salesman closes less deals, he has less money to go on vacation with, etc. etc.
- bilsbie 3y ago
  My guess would be: Lots of companies still filling back orders and latent demand from the last three years When unemployment is low companies are reluctant to lose staff for fear of not being able to rehire when needed The housing market hasn’t slowed much which is a huge employer Pent up demand for travel and services is still strong
  - Kon-Peki 3y ago
    A lot of back orders relate to the construction and fitting out of factories as part of the reshoring movement. Once those factories are ready to produce widgets, they need reasonably-priced labor to staff them (and export the unemployment to China). It's going to be really tough to do that if they can't create some unemployment over here.
- nostrademons 3y ago
  Until bankruptcies. The Fed rate doesn't directly affect employment - at best it may encourage some larger businesses to postpone hiring, but most companies (outside tech, which a.) has some very good macroeconomists b.) intends to survive and c.) is unusually sensitive to cost of capital) aren't going to lay off people until their bottom line takes a hit that puts their survival in question. Smaller profitable companies aren't directly exposed to the cost of capital at all, because they fund operations out of cash flow. The way interest hikes combat inflation is that they make certain lines of business unprofitable, which makes companies either voluntarily shutter them or go out of business for being unprofitable, which frees up the workers involved in those businesses to compete for core, need-to-have industries like food and logistics, which holds down wages. This is happening in tech, but it hasn't filtered down into the broader economy. And it needs to - even if you lay off everyone who "learned to code" in the last 10 years and force them back to working retail, there are still way more job openings than workers. We'll see unemployment go up when we see major Fortune 500 companies go bankrupt, and we'll see inflation drop sustainably when people are on bread lines.
dragonwriter 3y ago
> The fed is trying to raise unemployment, not lower No, the Fed is trying to lower aggregate consumer demand to rein in the growth in consumer prices. If it could acheive that entirely by adversely impacting availability and cost of credit while unemployment kept dropping, that would be ideal, given the other side of its dual mandate. It accepts as a natural consequence that unemployment will likely need to go up to acheive its goals on inflation, but raising unemployment is not a goal.
- fauxpause_ 3y ago
  > No, the Fed is trying to lower aggregate consumer demand to rein in the growth in consumer prices. If it could acheive that entirely by adversely impacting availability and cost of credit while unemployment kept dropping, that would be ideal, given the other side of its dual mandate. It would be ideal. But it is not achievable. So raising unemployment is a short term goal to achieve the broader goal of stability.
  - dragonwriter 3y ago
    > So raising unemployment is a short term goal to achieve the broader goal of stability. There is a difference between an accepted cost and a goal.
    - fauxpause_ 3y ago
      Their goal is to incur that cost. It is a short term goal.
screwturner68 3y ago
That's going to be very hard to do, the Boomers have retired and there isn't anyone to replace them and unless and until we fix immigration there won't be anyone to replace them. In addition, look at the job opening 50% of open jobs are in food service and retail. These are not good jobs they are kid jobs or jobs of last resort, nobody aspires to work the drive through at McDonalds. Powell is happy to drive wages down, he's probably thrilled that with the huge number of higher wage earners that had t file for unemployment last week -the most ever. As Powell said, this is going to suck for you working stiffs but at least your eggs will only cost $2.99.
- HDThoreaun 3y ago
  The egg situation was totally unrelated to macro conditions. It was caused by the need to cull most egg laying chickens in the country.

kortilla 3y ago

No, the fed has a dual mandate of controlling inflation and keeping unemployment low. They are absolutely not “trying to raise unemployment”. They are trying to control inflation and the expectation is that they will eventually have to stop raising interest rates (or lower them) because unemployment increases too much before they hit their inflation target.

fauxpause_ 3y ago
Yes they are. They’re very clear about this. They are trying to raise unemployment as a lever to reduce inflation. That is not to say they want unemployment to rise indefinitely, but they do want it to rise.
- kortilla 3y ago
  No they are not, they are very clear about this. They will keep raising interest rates until inflation hits their target. They will only stop before that if it starts to drastically impact employment.
- reducesuffering 3y ago
  Fed mandate is clear: Price stability and low unemployment. Their main lever is interest rates. Interest rate increases do not necessarily increase unemployment. Now that unemployment is low enough, their priority is inflation, and for that they will raise interest rates. If higher unemployment is a side effect that leads to 2% inflation, then their mandate is still achieved. But rest assured, if inflation comes down to 2% with unemployment flat or improved, it's all the better according to them. Their intention is not "more unemployment -> less inflation", it's just "less inflation," by any means necessary. They will accept causing higher unemployment to achieve 2% inflation because it's a balancing act between their two goals. "Powell said he hoped that a slackening of demand might reduce pressure in the labor market without raising unemployment."[0] [0]https://www.bloomberg.com/opinion/articles/2022-07-29/higher-unemployment-is-coming-and-the-fed-should-get-ready?leadSource=uverify%20wall https://www.bloomberg.com/opinion/articles/2022-07-29/higher...
solumunus 3y ago
They have said, literally, that they will not stop with rate hikes until unemployment is significantly higher.
- kortilla 3y ago
  No, they have said, literally, that they will not stop rate hikes until they hit their inflation target. They will also consider stopping if it starts to interfere with their max employment mandate. The critical difference that you are missing is that if inflation stops before employment declines, they will stop raising rates.

Waterluvian 3y ago

I hope they’re trying to lower unemployment. But yes, my flippant comment is mainly just about these kinds of headlines. And a free chance to take a shot at the wrong and bad minimum wages.

fauxpause_ 3y ago
They’re trying to raise it.
ElevenLathe 3y ago
> I hope they’re trying to lower unemployment. Prepare to be disappointed. They are openly trying to raise it in order to lower "inflation".

MuffinFlavored 3y ago

What's your biggest guess as to why, even with 5% interest rates, they haven't been able raise unemployment yet? How long will they need to hold interest rates at 5%+ before we see a raise in unemployment?

fauxpause_ 3y ago
I don’t think interest rates have the capacity to change unemployment right now until they hit some truly emergent effects like a much bigger banking crisis. The US’ economy is not as capital intensive as other economies past.
- MuffinFlavored 3y ago
  > I don’t think interest rates have the capacity to change unemployment right now I don't know. New + used car sales as well as new 15/30 year mortgages (or what would typically be refinances maybe) have to have some effect. A car salesman closes less deals, he has less money to go on vacation with, etc. etc.
bilsbie 3y ago
My guess would be: Lots of companies still filling back orders and latent demand from the last three years When unemployment is low companies are reluctant to lose staff for fear of not being able to rehire when needed The housing market hasn’t slowed much which is a huge employer Pent up demand for travel and services is still strong
- Kon-Peki 3y ago
  A lot of back orders relate to the construction and fitting out of factories as part of the reshoring movement. Once those factories are ready to produce widgets, they need reasonably-priced labor to staff them (and export the unemployment to China). It's going to be really tough to do that if they can't create some unemployment over here.
nostrademons 3y ago
Until bankruptcies. The Fed rate doesn't directly affect employment - at best it may encourage some larger businesses to postpone hiring, but most companies (outside tech, which a.) has some very good macroeconomists b.) intends to survive and c.) is unusually sensitive to cost of capital) aren't going to lay off people until their bottom line takes a hit that puts their survival in question. Smaller profitable companies aren't directly exposed to the cost of capital at all, because they fund operations out of cash flow. The way interest hikes combat inflation is that they make certain lines of business unprofitable, which makes companies either voluntarily shutter them or go out of business for being unprofitable, which frees up the workers involved in those businesses to compete for core, need-to-have industries like food and logistics, which holds down wages. This is happening in tech, but it hasn't filtered down into the broader economy. And it needs to - even if you lay off everyone who "learned to code" in the last 10 years and force them back to working retail, there are still way more job openings than workers. We'll see unemployment go up when we see major Fortune 500 companies go bankrupt, and we'll see inflation drop sustainably when people are on bread lines.

dragonwriter 3y ago

> The fed is trying to raise unemployment, not lower No, the Fed is trying to lower aggregate consumer demand to rein in the growth in consumer prices. If it could acheive that entirely by adversely impacting availability and cost of credit while unemployment kept dropping, that would be ideal, given the other side of its dual mandate. It accepts as a natural consequence that unemployment will likely need to go up to acheive its goals on inflation, but raising unemployment is not a goal.

fauxpause_ 3y ago
> No, the Fed is trying to lower aggregate consumer demand to rein in the growth in consumer prices. If it could acheive that entirely by adversely impacting availability and cost of credit while unemployment kept dropping, that would be ideal, given the other side of its dual mandate. It would be ideal. But it is not achievable. So raising unemployment is a short term goal to achieve the broader goal of stability.
- dragonwriter 3y ago
  > So raising unemployment is a short term goal to achieve the broader goal of stability. There is a difference between an accepted cost and a goal.
  - fauxpause_ 3y ago
    Their goal is to incur that cost. It is a short term goal.

screwturner68 3y ago

That's going to be very hard to do, the Boomers have retired and there isn't anyone to replace them and unless and until we fix immigration there won't be anyone to replace them. In addition, look at the job opening 50% of open jobs are in food service and retail. These are not good jobs they are kid jobs or jobs of last resort, nobody aspires to work the drive through at McDonalds. Powell is happy to drive wages down, he's probably thrilled that with the huge number of higher wage earners that had t file for unemployment last week -the most ever. As Powell said, this is going to suck for you working stiffs but at least your eggs will only cost $2.99.

HDThoreaun 3y ago
The egg situation was totally unrelated to macro conditions. It was caused by the need to cull most egg laying chickens in the country.