{"id":2216,"date":"2016-10-28T09:15:02","date_gmt":"2016-10-28T09:15:02","guid":{"rendered":"http:\/\/cfe.econ.jhu.edu\/?p=2216"},"modified":"2024-01-24T12:26:02","modified_gmt":"2024-01-24T17:26:02","slug":"six-degrees-of-separation-in-practice","status":"publish","type":"post","link":"https:\/\/krieger.jhu.edu\/financial-economics\/2016\/10\/28\/six-degrees-of-separation-in-practice\/","title":{"rendered":"Six Degrees of Separation in Practice"},"content":{"rendered":"\n
In a recent Financial Times article<\/a>, Faust notes:<\/p>\n\n\n\n [A] growing chorus of voices as diverse as Donald Trump<\/a>, the Republican candidate for the presidency, and Martin Feldstein<\/a>, former chief economic adviser to president Ronald Reagan, and now a professor at Harvard, are demanding that the Federal Reserve aggressively tighten monetary policy. Mr Trump\u2019s reasoning is hard to discern, but Mr Feldstein makes a traditional case for why job gains have become a dangerous thing. With the overall unemployment rate near the historically low level of 5 per cent, the argument goes, job growth must slow lest the labour market get too tight and prompt a surge in wage and price inflation. According to the Fed\u2019s minutes, some version of this argument has considerable support among the central bank\u2019s policymakers.<\/p>\n\n\n\n The very strong case against this position is just one manifestation of a point we\u2019ve been arguing for some time. In Six Degrees of Separation<\/a>, we labeled this a policy of preemptive unemployment<\/i> and argued that nobody understands the jobs-inflation link well enough to justify preemptive unemployment at the current time. Reflecting on employment trends over the past year provides a potent and unsettling illustration of our point.<\/p>\n\n\n\n Over the four quarters ending in September 2015, job gains averaged about 200,000 per month\u2014a bit more in the establishment survey, a bit less in the household survey. With the labor force rising by only about 50,000 per month, the jobless rate fell from 6.1 percent to 5.2 percent.<\/p>\n\n\n\nSix degrees of separation over the last four quarters<\/h3>\n\n\n\n