Quote:
Originally Posted by Slava
This is interesting to me on a few fronts. First, there is some pretty strong evidence that the rate increases are not entirely reducing inflation, but adding to it. This doesn't apply in all sectors, and there is a net benefit, to be clear. But one are where it might be working against the central bank is housing because the rate increases obviously increase the financing, which pushes rents up at the same time. This is adding about 0.5% to the inflation rate, which is obviously not helpful.
The second part I find interesting is that with unemployment rates holding well, and companies clearly reluctant to lay off workers that they've had a difficult time in finding in the first place, it suggests the soft-landing is still in play. Typically a recession would see job losses and a rise in unemployment, which we really aren't seeing at all. GDP has also remained positive and strong. Basically despite all kinds of heuristics and such, the economy has tolerated the rate hikes and remains resilient for the most part. Interesting times.
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More jobs with no change in unemployment implies a change in the labour force, probably by increased participation.
Economic growth from people who weren't previously working (maybe because of covid concerns?) seems like a good thing to me and is likely not inflationary.
Increased labour force participation could also be a symptom of inflation (eg some people who didn't need to work before like stay-at-home parents or seniors) getting jobs to cope with the increased cost of living. That seems less positive to me, but is still disinflationary.
Edited to add: immigration is probably also increasing the size of the labour force. Not sure how that affects inflation. Probably disinflationary to wages and inflationary to housing.