Ones and Tooze Why Low Unemployment Isn’t Better News
May 13, 2022
The U.S. unemployment rate is impressively low, but it raises questions about inflation and job market dynamics. The hosts tackle the paradox of low unemployment alongside rising inflation and a declining labor force participation. They share insights into Africa's population boom, examining its economic implications and the challenges it presents. The conversation emphasizes the need for investment and innovative policy solutions to address complex issues impacting both the U.S. and Africa, uncovering opportunities amid these shifts.
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Low Unemployment Doesn't tell the whole story
- The US unemployment rate is at a historic low of 3.6%, seemingly indicating full employment.
- However, the employment-to-population ratio reveals a less optimistic picture, with fewer prime-age Americans working than in 2000.
Wage-Inflation Dynamics
- A tight labor market like the US currently experiences does exert upward pressure on wages, but wages are lagging behind rising prices.
- Only a small fraction of the current inflation can be attributed to wage increases; most stems from increased input costs and profit margins.
The Politics of Unemployment
- While low unemployment can theoretically overheat the economy and drive inflation, politicians rarely address it directly.
- Central bankers are more likely to advocate for higher unemployment to control inflation, as they prioritize price stability.