The idea is that, with approximately two openings for every unemployed person searching for work -- versus a ratio of about 1.2 in the years before the pandemic -- the unemployment rate will have to go higher now than it would have had to then to bring labor supply more in line with labor demand and reduce upward pressure on wages.
At 3.7% in August, the unemployment rate counted 6 million Americans out of work and actively searching for a job. A rise to 4.5%, assuming no change in the size of the labor force, would amount to job losses of about 1.3 million.
But the pain won’t be distributed evenly, according to Michelle Holder, an economics professor at the John Jay College of Criminal Justice in New York.
Holder noted that unemployment for Black and Hispanic Americans tends to rise faster than that for White Americans in economic downturns. There’s also the risk of increased homelessness and hunger among lower-income households due to job loss, as well as the long-term impact on earnings and employability from being out of work.
“I’m fearful that if these projections have a large margin of error, we are talking about really rolling back substantive gains in terms of Black employment in this country,” Holder said. “What I think the Fed is missing is that the pain is not a sort of modest pain for everyone.”
This article was provided by Bloomberg News.