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QE, or not QE?

Summary:
To say the labor market is “strong” would be an understatement. The unemployment rate is now 4.2%. Only 3 of the previous 50 years saw lower unemployment rates (2000, 2018, 2019). Firms are desperately short of workers, despite fast rising wages. Service sucks almost everywhere I go.Inflation is also above target, whether you look at a 1, 2, 3 4, or 5-year time frame.So why is the Fed currently doing QE? What is the goal of this program? PS. David Beckworth directed me to a Skanda Amarnath tweet showing the amazingly quick recovery in the job market, compared to the Great Recession (for prime age workers): PPS. Total employment in the US remains nearly 4 million below pre-Covid levels, while in Canada the previous peak has already been surpassed: The

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To say the labor market is “strong” would be an understatement. The unemployment rate is now 4.2%. Only 3 of the previous 50 years saw lower unemployment rates (2000, 2018, 2019). Firms are desperately short of workers, despite fast rising wages. Service sucks almost everywhere I go.

Inflation is also above target, whether you look at a 1, 2, 3 4, or 5-year time frame.

So why is the Fed currently doing QE? What is the goal of this program?

PS. David Beckworth directed me to a Skanda Amarnath tweet showing the amazingly quick recovery in the job market, compared to the Great Recession (for prime age workers):

QE, or not QE?

PPS. Total employment in the US remains nearly 4 million below pre-Covid levels, while in Canada the previous peak has already been surpassed:

The unemployment rate fell to 6% — very near pre-pandemic levels — from 6.7% in October. Employment is now 186,000 jobs beyond where it was in February 2020. Hours worked rose 0.7%, fully recouping Covid losses for the first time.

Whatever factors are depressing US employment do not seem to be operative in Canada.


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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