Rarely in America’s past has an inflation rate of 8.5% felt so good. But officials at the Federal Reserve are not celebrating
Save time by listening to our audio articles as you multitaskYet what counts as slack is very much up for debate. In its broad outlines, the concept is clear enough. It represents a supply of workers in excess of labour demand: too many people chasing too little employment. Under such conditions, firms do not need to work very hard to lure or retain workers, and pay packets thus grow slowly, if at all. At present, there does not seem to be much slack about.
Yet some Fed officials argue that precisely because the number of job vacancies is so high, it may be possible to introduce slack into the labour market through reductions in the number of posted openings—without having to push millions of people out of work.
There are other places, apart from the balance between job openings and unemployment, to look for more slack. An increase in labour supply, either through increases in average hours worked, or through the entrance of more people into the workforce, could have the effect of bringing down wage growth without unemployment having to go up.
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