Inflation has so far fallen without mass casualties, but central banks and politicians are asking a lot from a tool as blunt as monetary policy.
For two years, rich-world wage growth has added to corporate costs, sending prices relentlessly upwards. But as policymakers began raising interest rates to slow the economy, they hoped for an even rosier outcome. They wanted to achieve a
The scale of the task central bankers set themselves was illustrated by history. Research by Alex Domash and Larry Summers, both of Harvard University, found that there had never been an instance in which the American job vacancy rate had fallen substantially without unemployment rising significantly. Last year, Michael Feroli of JPMorgan Chase studied the record and noted that “whenever the vacancy rate goes down a little it goes down a lot, and the economy lands in recession”.
For policymakers, this success would feel a little soiled if it came with a sharp rise in joblessness. According to rules of thumb for the US discussed by Domash and Summers, in normal times you would expect a 20 per cent-plus fall in vacancies to come alongside a rise in unemployment of three or so percentage points within a year.In reality, a year or so after vacancies started heading down, something else appears to be happening. Recently, thein the OECD has held steady.
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