The statistical data of unemployment rate released last week. 3.5% in September 2022, another lowest level even in history.
The U.S. economy is encountering still hgih level of inflation. To fight the inflation, one of the target of the Fed, the Federal Fund Rate has already been increase to about 3% to 3.25% in order to slow down the economy. However, the unemployment data shows the economy is seemingly continuously heating.
There several reasons explain the over-heated labour market.
- Individuals have already overcome the pandemic, and the consumption, especially service, are in high demands. There is even an overshooting of demands for labours.
- Many people leave the labour market, and are classified as distressed workers who are not included in the calculation of unemployment rate.
- Immigrant policy have changed since the Trump. To increase the employment rate for those “domestic” U.S. citizens, the immigrant policy has been not that friendly. Less low-cost labours inputed into the U.S. economy drives a gap of workers.
The low unemployment rate provides the Fed another inspiration of QT.