, has scarcely budged since March 2022, when the Fed began imposing a series of 11 rate hikes at the fastest pace in decades.
The idea that defeating high inflation would require sharply higher unemployment is based on a long-time economic model thatClaudia Sahm, a former Fed economist, suggested that those who assumed that surging unemployment was a necessary price to pay for conquering inflation believed that the price spikes of the past 2 1/2 years were driven mostly by overheated demand.
This inflationary episode, Detmeister said, may end up more closely resembling the one that occurred after World War II than the one of the late 1970s and early 1980s. After World War II, manufacturing output slowed as factories retooled from wartime production. At the same time, many returning servicemembers moved to the suburbs, and demand spiked for homes, appliances and furniture. Even so, inflation eased once output resumed.
Another supply improvement has occurred in the job market: The supply of labor. Since the Fed began raising rates last year, about 3.4 million people have begun looking for work. One big driver factor has been a rebound in immigration that followed the easing of pandemic-era restrictions. Even among businesses that worry about the economic outlook, many are more reluctant to cut jobs than in the past. Jay Starkman, CEO of Engage PEO, which provides human resources services to small companies, said many employers seem “hung over” from the rapid layoffs and then rapid rehiring that occurred during and after the pandemic recession of 2020.