Economic Perspective: Too Much of a Good Thing?

MIKE WALDEN:

“Today’s program asks, ‘Is there too much of a good thing?’ The job market has been on a roll recently with strong employment gains in both the nation and North Carolina, but some economists fear we may pay for this good news with faster price inflation. Should we worry?”

“This has long been an issue in economics. The question is whether we can get both low inflation and low unemployment at the same time. Now part of the answer depends on how much slack there is in the labor force. If we can attract individuals who have dropped out of the labor force in recent years; bring them back into the labor force then new jobs can be filled without pushing up inflation.”

“One recent analysis by the Federal Reserve said that the bite of higher inflation won’t occur until the jobless rate falls to under 3.75 percent, and we’re not there yet. But the Federal Reserve is going to closely watch this. If they see continued job growth without inflation they may hold off on more interest rate hikes.”

Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.