[lbo-talk] unemployment rate getting too low!

[Mark S]

Doug Henwood wrote:
>
>Autoplectic wrote:
>
>>Slowing the pace of job creation is not the same as increasing the
>>level of unemployment...............
>
>Sure it is, as long as the population is increasing. The thinking behind 
>this is that the labor market has become too taut - i.e., there's not 
>enough slack, i.e., unemployment is too low - which is pushing up wages. 
>One problem with this theory is that it's not direct pay that's pushing up 
>unit labor costs (which are rising, and ULC lead inflation pretty 
>reliably), but the cost of fringe benefits, meaning health insurance.
>
>It's a little odd to see this coming from Goldman, which is usually more 
>"liberal" than other Wall Street houses.
>
What is Goldman trying to accomplish?  Are you assuming that they are 
signalling their preferences to the Fed on monetary policy?  Or are they 
simply warning their clients to expect higher short-term rates, with rising 
labor costs as the reason?  In other words, are they practising normative or 
positive economics?  I don't fully understand the feedback mechanism among 
the Fed and market players.

M.

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