In 2019 every month there were 205 thousand jobs for at least 100 thousand more than you need, based on population growth. So, in principle, it is not surprising that the share of unemployed decreased to 3.6% — the lowest level in 50 years.
It would mean that the companies are so understaffed that they have to increase wages, “acceleration” of inflation. It just isn’t happening: wage increases on average by 3% per year, and the price increase is 1.5% less than the target for the Federal reserve rate is 2%.
Your statistics should be analysed somewhat differently. The unemployment rate is a less reliable indicator, given the damage that was caused by the recession. The government only considers those who are actively looking for a new job, ignoring those who are disappointed in these searches.
It is necessary that the fed adequately assess what is happening in the labour market, to fulfil both its function is to achieve price stability and maximize employment. Since the decisions in the sphere of monetary policy could make only with delay, it is important to know when the share of employed reaches a maximum or inflation starts to excessively accelerate.
The current unemployment rate is misleading because millions are unemployed. In 2015 the Federal open market Committee suggested that this indicator cannot be lower than 5.1%, in order not to provoke inflation.
More than 70% of those who got the job in April, said that a month earlier was not engaged in the search. For 20 years, despite UPS and downs in the economy, the disability becomes more severe because the people in working age do not work. It is possible that to reverse this trend will not succeed, but in recent years also increases the number of those who seek work, but could settle for a disability pension. But whether this dynamics depends on political decisions.
It is necessary to change the method of analysis of what is happening in the labor market and to assume that labor costs (wages plus other charges) should increase as well as productivity plus inflation. In other words, it is necessary that wage growth was 3.5 and not 3% as this indicates that economic opportunities are not used in full force. In addition, over the past 40 years the share of national wealth received by workers has declined from 65% to 62%, and the increase in this indicator could bring to ordinary citizens more money without creating inflation risks.
President of the Federal reserve Bank of Minneapolis