What is Full Employment?

As Tyler argued last week one of the most common analytical inaccuracies on Twitter is to blame the Fed for being too conservative with monetary policy over the last few years. I see this problem on both the left and the right. One of the ways the argument goes is as follows::

This month’s unemployment rate is lower than last month’s unemployment rate. Thus, we could not have been at full employment last month.

Followed by:

Monetary policy should be less conservative. If only we had been more aggressive earlier, we could have reached where we are sooner and made millions of people better off.

All of this is wrong. To begin, full employment does not mean the lowest possible unemployment rate. We are at full employment when we are at the natural rate of unemployment and as Milton Friedman wrote:

The ‘natural rate of unemployment’….is the level that would be ground out by the Walrasian system of general equilibrium equations, provided there is imbedded in them the actual structural characteristics of the labor and commodity markets, including market imperfections, stochastic variability in demands and supplies, the cost of gathering information about job vacancies and labor availabilities, the costs of mobility, and so on.

The natural rate can change over time, even in a sustained direction, as the structural characteristics of the economy change, as demand, supply, demographics, information and so forth change. Change does not mean disequilibrium. When the production of apples is bigger this year than last year we don’t jump to the conclusion that last year the apple market was out of equilibrium. Similarly, the fact that unemployment was lower this year than last year does not mean that we weren’t at full employment last year.

The point of Friedman’s 1968 piece was that monetary policy can’t do much to influence the natural or full employment rate. Thus, the second half of the argument also doesn’t follow. In other words, it doesn’t follow from the fact that unemployment is declining that monetary policy last year could have achieved this year’s unemployment rate last year. My children are taller this year than last year but that doesn’t mean I could have accelerated their growth by feeding them more last year.

Monetary policy can make a big difference in arresting a negative spiral of declining spending leading to declining income leading to declining spending….Keynes was right. Scott Sumner was also right to call for more aggressive monetary policy in 2008-2010. But that was a disequilibrium event, now long over. When children are starving, you can get them to grow faster by feeding them more, but don’t try using that rule in normal times. Today we are in normal times. The economy has been growing steadily for over a decade. We are not in a downward spiral and wages and prices are not stuck at 2008 levels. In fact, since the end of the recession a large majority of workers are in new jobs! Indeed, a good chunk of the labor force has retired since 2008 to be replaced by entirely new workers. Nothing sticky there.

Standard macro models do not imply that monetary policy can always lower unemployment. (I can’t believe I have to write that in 2020 but the great forgetting is well upon us). Indeed, the standard models, as Tyler discussed, are all about testing and deepening our understanding of the Friedman list, most notably “the cost of gathering information about job vacancies and labor availabilities.” Bottom line is that nobody ever said that we had to like the Walrasian equilibrium but like it or not, monetary policy can’t do much to change it.


Again, more talk of Fed behavior that totally fails to acknowledge, much less discuss, the more heavily-weighted of the two mandates. Talk about an egregious " analytical inaccuracy".

Fact is, even if one completely ignores the unemployment mandate, there is still perfectly defensible rationale for less "conservative" Fed policy over that time frame due to consistently below-target inflation.

MR has a lot to offer, but it's really bad at macro.

Inflation as measured by CPI has been consistently above 2% since early 2018 though.

The Fed is using PCE inflation rather than the more well-known CPI and Will's statement is true given that target.

CPI inflation has been in decline since 1980, even though government debt as reached higher and higher.

And if one actually looks at the charts rather than apply some philosophy, one sees that the Fed always, without fail, follows the one year treasury not the CPI. The Fed', and the primary dealer's job one is to keep Treasury liquid, always has been their job regardless of what the philosophers say.

kip the philosophy, drill down into the charts.

That’s true, but CPI is more reflective of people’s experiences of inflation. I’ve noticed higher inflation in the last two years. And if the question of whether the inflation target is met depends on which specific index is being used, then it’s hard to say inflation is consistently undershooting.

Exactly. Using PCE instead of CPI gives the Fed an extra 60 bps of wiggle room for their inflation mandate. Worth pointing out that even Fed website consistently uses CPI data (headline and core) when explaining inflation to readers. Lastly, core CPI has been above 2% for a larger percent of this business cycle than the prior cycle. Let's stop the uninformed claims (esp in the media) that low inflation is a problem

First, if the Fed is targeting PCE inflation then by definition they are undershooting their target if PCE consistently comes in below their stated target. There is no question of "depends on which specific index is being used" since they have clearly stated their target.

Second, other than in the very short-term, I don't think I buy that CPI is more reflective of people's experiences of inflation. When beef gets relatively more expensive compared to chicken, people (on average) adjust pretty quickly and start buying less beef/more chicken. PCE inflation adjusts for this; CPI does not.

Agree with you on chaining, but the biggest difference between CPI and PCE are the relative weights they assign on things: https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2014-economic-trends/et-20140417-pce-and-cpi-inflation-whats-the-difference.aspx

And the biggest difference in weight seems to be that CPI puts 31% on shelter and 7% on healthcare, while PCE puts only 15% on shelter and 20% on healthcare: https://amp.businessinsider.com/pce-vs-cpi-weight-comparisons-2014-6. The CPI measure seems much more reflective of people’s actual spending; I doubt too many households unless they are very rich are spending only 15% of their income on shelter, or spending more on healthcare than shelter.

Excellent links and great analysis!

Besides the rich households it might be likely that older, retired households with no mortgages pay more for healthcare than shelter.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it." This expression, and variations of it, has been attributed, at various times, to Upton Sinclair, H. L. Mencken, William Jennings Bryan, even Paul Krugman, among others. In the context of monetary policy, it's difficult to get a man to understand the limits of monetary policy, when a significant part of his income depends on rising asset prices fueled by loose monetary policy.


So much of our policy, both within and outside the Fed, is focused around rising asset prices, especially in the land/housing market. It is this imperative that if we do not have constantly increasing asset prices across the board, the entire system will come crashing down around us, and we're like Clark Griswold trying to chew enough gum to keep the Hoover Dam from leaking.

I bought a house in 2007 and sold it in 2017 for 90% of what I bought it for. Is this the "rising asset prices, especially in the land/housing market" to which you refer, or are you sampling from a handful of places with lots of NIMBY restrictions?

Maybe you missed it, although it was in all the papers, there was a financial crisis in 2008 that caused asset prices to plummet, not only stock prices but home prices too. The Fed stopped the fall and re-inflated asset prices, but in many places housing prices, as opposed to stock price, have not returned to the pre-crisis level, a distinction that fueled the right-wing fever from which we continue to suffer. Another commenter likes to make the point that the annual price increases for stocks for the past 20 years has been below historical levels, failing to mention what occurred in the middle of that 20-year period. Readers of this blog may not be students of history, but they do know the history of the past 20 years because they lived it.

I was specifically replying to George's comment "especially in the land/housing market".

Your incoherent ramblings about the stock market are self-refuting. "Confused old liberal lawyer climbs aboard the Austrian train late in life" is a sad trajectory.

Because you bought at the top like an overeager stooge.

Yes. This is Solution D-1 from Moldbug's "Sam Altman is not a blithering idiot":

Therefore, absolutely the best way to inflate AGDP is to increase private-sector capitalization, generating a wealth effect. Moreover, there are two ways to do this, since there are two forms of capital asset: debt and equity. Debt is dangerous because it has to be paid back. More on this in a moment. So we have a second-best way to inflate AGDP, convincing the private sector to borrow more; and a first-best way, making the stock market and real estate go up.

The latter is solution D-1, the absolute bestest way (from a political perspective) to create jobs, and the mainstay of the Greenspan-Bernanke era of American prosperity. In short, our actual reality. The former is solution D-2, as practiced in the great nation of China.

Whenever one raises this issue, one is labeled a crank obsessed with inflation. Rising asset prices is not inflation; indeed, the assets I am referring to don't even figure in the calculation of inflation, "inflation lurking in the background" perhaps, but not inflation. Moreover, the idea that a "loose" monetary policy by itself will lower unemployment while increasing economic growth is belied by the experience of the past ten years: "pushing on a string" doesn't work. What lowers unemployment and increases productivity, wages, and economic growth is investment in productive capital, something lacking today, even after the Trump corporate tax cut that was sold to the public on the promise that it would. Any why should it: American business is cashing in on rising asset (stock) prices. We are on the wrong path, a path that won't end well. Not according to the monetarists, who think the sun rises and sets on monetary policy.

Correlation is not causation.

In the two years immediately following President Trump's inauguration, the Fed Funds rate was raised from 0.50% to 2.50% (prime rate 3.5% to 5.5%). the Fed raised short-term rates 0.25% seven times (March, June December 2017; March, June, September, December 2018) culminating in a Christmas Eve 2018 stock market nose-dive. Since, there have been three 0.25% decreases to target 1.5% - 1.75% (prime now 4.75%). Conversely, the rest of Planet Earth has near zero or negative short rates.

It seems as if employment and price stability were not severely impacted.

Was Milton Friedman, or any of his children, ever unemployed?

We have been bringing forward investment and spending that would have been made in future years, but will be made now because money is historically cheaper.

Don will claim the credit for current spending, and give the blame for the falloff for the next President.

And, wasn't Don the one who criticized Yellen for QE lowering rates "too much." https://www.reuters.com/article/us-usa-election-trump-fed/trump-accuses-fed-of-keeping-rates-low-to-help-obama-idUSKCN0SS22A20151103

You must have posted in the wrong thread. This is about monetary policy, not politics.

Oh, I am so ashamed.

I never realized that monetary policy ever got entwined with politics, or that a politician would ever discuss it. Or, that politicians would push the Fed in directions that favored their re-election at the expense of the future.

Monetary policy should be left for the politically uninterested, such as that great economist Larry Kudlow.

But, maybe your comment is a joke.

>My children are taller this year than last year but that doesn’t mean I could have accelerated their growth by feeding them more last year.

My favorite thing about "economists": They never, ever feel the need to argue their talking point. All that's required is really bad and irrelevant analogy.


For another bad analogy, full employment does exist with extant examples. Soviet Gulags for one. Full employment definitely existed there. Therefore, all societies should attempt to be Gulags. They have full employment!

Would non-living wage earners count as Gulag or full employment?

The ‘natural rate of unemployment’….is the level that would be ground out by the Walrasian system of general equilibrium equations, provided there is imbedded in them the actual structural characteristics of the labor and commodity markets, including market imperfections, stochastic variability in demands and supplies, the cost of gathering information about job vacancies and labor availabilities, the costs of mobility, and so on.

Which strongly suggests that this "natural rate" is not knowable or calculable from any practicable amount of data, and thus all statements comparing measured quantities with this imaginary "natural rate" are bullshit.


If it is in practice unknowable, or in practice only knowable once there is substantial wage led inflation, then the Fed has not achieved full employment since at least the 80’s. Even in the 90’s, rising wages were accompanied by rising productivity so that there was little inflation. Of course, since the Fed in practice never achieves full employment, there is ample scope for the Fed to do more to increase employment.

And therein lies the rub: "provided there is imbedded in them the actual structural characteristics of the labor and commodity markets." How is working part-time as an Amazon delivery driver counted? Working in the gig economy? Yes, lots of people are "working" yet many of those people live in their cars. We need to be asking better questions about employment. We're doing economic and social policy here, as in, we are supposed to be making this country function well, not arguing about whether we can fit more angels on the head of a pin before declaring it "full."

How many of those people are living in their cars? Is your implication that the labor market is far worse than it appears from unemployment numbers?

The point is we aren't counting what matters. So we have no idea. The disappearance of pensions and health insurance for most workers also is relevant. Are we counting what matters? I believe what matters is whether massive corporate financial gains are making the American worker more financially secure. And we are not counting that so we can't answer your question. We're left with a subjective, social-media driven, ideological debate. Big data to the rescue?

Most workers don't have health insurance? Can you document that?

Interesting question. I also wonder how Uber driver income compares to minimum wage, or other gig work compare to minimum wage, and does this tell you something about the labor market and wages.


Policy is Politics.

Monetary Policy is Politics.

Politics is the imposition of subjective value judgments.

Productive-Employment is the goal ... that raises general standard of living (not Keynesian dirt hole digging & dirt hole filling)

It is easy enough to replace the Fed board with a bot, we know the equations. Fintech runs bot controlled S/L all the time, works fine.

Alex, I strongly disagree with your post here. You seem to be implying that many critics of the Fed's conservative stance over the years don't understand the idea of the natural rate of unemployment. So, let's look at the FOMC's own estimates of the natural rate of unemployment as of the Dec 11, 2019 meeting (at least some of them seem to understand the concept...) https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20191211.htm .

In 2019 their median estimate of the long-run rate of unemployment (natural rate) is 4.1%.

Their projection for the unemployment rate in 2020 is 3.5% and projection for PCE inflation is 1.9%. By their own forecast, their current stance seems roughly appropriate. Not bad! No major changes seem needed.

But, looking back six years to 2013 we have a problem (https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20131218.htm). The unemployment rate for 2013 was estimated by the FOMC to be 7-7.1%, while PCE inflation was estimated to be 0.9-1.0%. And their estimate of the natural rate of unemployment? 5.2-5.8%.

Looks pretty bad! in 2013 the Federal Reserve was failing on both ends of their dual mandate. PCE inflation was much lower than the 2% target, and unemployment was significantly higher than their estimates of the natural rate! Their projections for 2014 also predicted unemployment higher than the natural rate and PCE much lower than 2%. Seems like a call for increased monetary stimulus is in order, right?

Is that what we got? Some members updated their opinions on the timing of future rate hikes (forward guidance), but no significant changes to the FOMC stance on monetary policy were made. By their own forecasts the Fed was failing in both mandates, and did nearly nothing!

No appeals to their poor (in hindsight) estimates of the natural rate of unemployment are needed to criticize the Fed. But, remember, in 2013 the FOMC's estimate of the long-run rate was 5.2-5.8% and now their median estimate is 4.1%. Unless you think the natural rate has dropped by over 1% in just 6 years (which would be quite remarkable! Remember, they are projecting the long-run rate) their estimates were in fact badly wrong. This just makes the Fed's inaction even worse in hindsight, but even by their estimates at the time their inaction was completely unjustified.

It is remarkable how question-begging is this analysis, including some of the other responses. Blah blah blah about mistaken forecasts, but there is no actual argument that a higher rate of price inflation would have done much good.

That's why I wrote my comment as a response to Alex's post, not yours!
Alex was making a narrower point about the natural rate of unemployment (excepting a single sentence in the last paragraph) and that's what I was responding to. I'm also less interested in criticizing the FOMC for their poor forecasts--few if any were doing significantly better. Rather, their actions weren't appropriate for the forecasts they were making (right or wrong).

I also agree criticizing your post requires much more work.

The downside of a more aggressive monetary policy is supposed to be inflation has costs. But if inflation was below the Fed's target, it suggests that a more aggressive policy would not be all that costly.


Not so long ago you were putting forward the argument that the natural rate of unemployment had permanently risen because of improvements in computer games, and that we should just come to terms with big decreases in labor force participation because all the missing men were happy on their couches, playing Overwatch.

Now Alex comes along with "improved employment outcomes today don't necessarily imply that our policy yesterday was wrong, perhaps the labor market just keeps changing, month after month [in some unspecified way]".

But, curiously, he doesn't mention computer games at all. Did they get a lot worse? Or maybe hand-waving about structural changes can be made to fit any observed set of facts provided you're not required to provide actual evidence of the changes.

Outside of some shock that raises the relative cost of fuel or electricity, or a really big disruption in trade, how would the US even get price inflation without strongly rising nominal wages? And how would nominal wages go up without a tight labor market?

The unemployment rates reported in the FOMC's Summary of Economic Projections are NOT natural rates. They are participants' best assessment of the rate to which the unemployment rate would converge over the longer term in the absence of shocks and assuming appropriate monetary policy. The FOMC's January 2012 Statement on Longer-Run Goals and Monetary Policy Strategy" explicitly avoided equating that with maximum employment or the natural rate. See https://drive.google.com/file/d/1IdST4TKVvWZbM4dTyuhIWGpxbyeurMn-/view.

Yes, I know they make that distinction. But, I also believe that if you asked FOMC members to estimate the natural rate most would give the same number, or so close a number that the difference is meaningless.

But, I'll defer to you--if you are Jeffrey Lacker formerly of the Richmond Fed I'd genuinely love to hear your answer of how your estimate of the natural rate and the longer term convergence rate differed when you were a voting member and how that shaped your vote (if you've previously written about this links are welcome).

Thank you--I am indeed him. It's important to recognize that, to put Alex's point somewhat differently, the natural rate should respond to virtually all real disturbances (that is, preferences, technologies, government purchases, and the like). Woodford has emphasized this as well. Thus one would expect the natural rate at any given point in time to reflect shocks up to that period. So in, say, the first quarter of 2010, the natural rate would reflect the fact that a large number of workers formerly employed in residential construction were no longer gainfully matched with an employer, and thus were seeking a match elsewhere. The gap between their skills and the skill sets sought by employers that did happen to have vacancies represented a real impediment to lowering the unemployment rate, one that monetary policy was unlikely to materially affect. On can imagine other cogent impediments as well--regulatory changes, for example-- that would be equally relevant. These considerations suggested to some of us at the time that the natural rate could have been quite elevated. Empirical estimates derived by fitting DSGE models typically show significant fluctuations over time.

In contrast, the other approach to estimating a "natural rate" is based on the NAIRU idea. Despite the superficial similarity, this is actually a very different approach, because it excludes virtually all real shocks except for slow-moving demographic shifts that might alter the relative prevalence of groups with typically different unemployment rates, or perhaps unemployment insurance benefits. These are typically implemented empirically by fitting a Philips curve but imposing on the NAIRU estimate that it is very smooth and slow-moving over time.

My sense is that the majority of FOMC members then thought of the natural rate as NAIRU, equating the two, while a minority understood the distinction I have described.

I discussed this subject in my recent paper for the Cato Monetary Conference, on pp. 12-14. You can find it at jeffreylacker.org/recent-work. (I'm not sure how to put a real link in these comments--Sorry!) The paper references my comments on this at the December 2011 FOMC meeting--pp. 136-7 in the transcript--as well as John Williams'--p. 141.

I completely agree with Alex's post. For another perspective, consider the pace at which the unemployment rate falls in any given post-recession expansion. That pace was only marginally slower following the 2008-09 recession, compared to other recent expansions.

Thank you for the link. And, I agree with your description of what the natural rate is but I would still love to get an actual number from you, if possible. For example, in 2011 or 2012 when you were a voting member what would have roughly been your actual estimate for the natural rate of unemployment and how did it differ from how your estimate of long-run rate? The period from 2010-2014 is when I'd be most critical of the Federal Reserve's conservative stance (side note: I was a research assistant at a different regional Fed during some of that time and paid much closer attention to current economic data than I do now).

If the difference is more than a few tenths of a percentage point I'd find the story of residential construction being the cause of the difference very implausible. It isn't nearly a large enough share of the economy to support a multiple percentage point difference between a long-run and natural rate in my view as would be needed to justify the Fed's conservative stance at the time in the face of significantly under-target inflation. In my view, given the inflation rate you'd need to believe we were already under the natural rate of unemployment at the time (2010-2014) to justify a conservative stance which is not believable to me.

And, to your last paragraph, I would look to other countries that either avoided a recession entirely like Australia or recovered much more quickly as evidence suggesting a faster recovery was possible but that's a much longer discussion. But, even though this is interesting these are both side points to my disagreement with Alex's article and the point I was making.

I don't disagree with Alex's description of the natural rate either, but I strongly disagree with his implication that criticisms of the Fed's actions rely on a misunderstanding of the natural rate. And, as you and I both suggest, most FOMC members didn't even make the distinction between between the NAIRU and natural rate. So even if one accepts that votes of a minority of members like you were justified based on their beliefs about the natural rate, most were not and criticizing the FOMC in general for not taking a more accomodative stance based on their own forecasts is justified.

Also, I just went to look up the construction employment story you reference a bit more carefully. For your story to be true there would have to have been a structural change in the amount of people employed in the construction industry, with a correction toward a much lower number of construction employees. Otherwise, there is reason to think fall in construction employment was just an aggregate demand problem. Looking at the data, construction employment has recovered on pace with the overall economic recovery and is nearly equal to it's pre-recession peak https://fred.stlouisfed.org/series/USCONS . I don't doubt there was some adjustment and this did very slightly raise the natural unemployment rate, but again, it's hard to believe this and other similar issues like regulation could account for a multiple percentage point rise in the natural rate.

I’m hesitant to go out on a limb with a point estimate, but I will say that at the time I thought the relevant natural rate was significantly closer to the actual unemployment rate than it was to common NAIRU-type estimates. Once workers in residential construction and related building supply industries began becoming redundant in 2007 and 2008, the economic challenge became sectoral reallocation. These were generally less-skilled workers, many of them former manufacturing workers. In the 2010-14 time frame, and in fact beyond, we heard widespread reports from business contacts of a dearth of adequately skilled workers. In addition, long-term unemployment rose significantly as a fraction of total unemployment, which evidence suggested reflected skill mismatch rather than scarring. Moreover, few businesses seemed interested in borrowing, suggesting that marginal reductions in borrowing rates were unlikely to induce much additional spending.

I would disagree with the characterization of the Fed’s stance during 2010-14 as “conservative,” in the sense that we could have provided more stimulus to aggregate demand. It was not at all obvious that asset purchases were having much effect, for example. Event studies at the time seemed hopelessly contaminated by the effect of asset purchase program announcements on private sector expectations for economic growth and thus the path of future short rates, another point Woodford emphasized. I have not kept up with the more recent empirical literature on asset purchases, so perhaps a different assessment is appropriate. Also, I am not aware of a strong case that the habitat effects that limit arbitrage along the U.S. Treasury yield curve do not also limit the effects on private borrowing rates. You would think the asymmetry would be the opposite—easier arbitrage among Treasuries but difficulty arbitraging between, say, 10-year Treasuries and 10-year corporate bonds.

One thing we might agree on, perhaps, is that forward guidance could have been stronger. The FOMC very carefully phrased forward guidance as a forecast of what it thought the FOMC was going to do in the future, and very carefully avoided language suggesting future actions that would depart from what we would otherwise have wanted to pursue. Preserving optionality trumped providing commitment to low rates. The expected policy path was pushed down nonetheless, however.

Well, I still disagree about the magnitude of those types of reallocation issues relative to the pre-recession and post-recovery periods (see the follow-up comment I made about construction employment). But I do agree actually pursuing more accommodation was a big challenge. I’m also agnostic about the effect of asset purchases although my impression is that the evidence now is somewhat positive about it (I also haven’t looked closely at this in the last couple years, though).
I certainly would have liked stronger forward guidance. I also believe this optionality you describe undercut much of the credibility and thus power of the Fed’s forward guidance like you suggest, though perhaps that was unavoidable. I call the stance conservative because FOMC members were forecasting below-target inflation and unemployment above the natural rate and yet not changing significantly changing even their forward guidance, if at all. If, for example, in repeated meetings the FOMC is forecasting failure to meet both mandates over the next year and yet not significantly altering its forward guidance or use of other tools to communicate a more accommodative stance (or at least not less accommodative!) I believe they are behaving inappropriately. This was par for the course in the 2010-2014 period.
Personally, I’m an advocate of price level targeting. Under a price level target the Fed would have a clearer communication framework and have much more clarity and hopefully credibility in its forward guidance. If the Fed can announce it will keep rates low until a certain price level path has been reached that would be both clear and more credible in my view. I’m glad to see more interest in level targeting of different sorts over the past few years.
I do in fact spend more time defending the Fed than I do criticizing it—I and hopefully others are holding the Fed to a very high standard here in hopes that the next crisis will be handled even better.
Thanks for repeatedly responding, this was a nice discussion!

Was Walt Kelly a communist?

I think the operative choice is between people who want to tighten policy to avoid inflation, however unlikely, and people who wan to loosen, not being sure it will help. The technical terms are "worth a shot" and "let's roll the dice" for the loosen camp, which includes me. On the other hand, Alex has given a good summary of what should be accepted given what we we've been through.

"Monetary policy can make a big difference in arresting a negative spiral of declining spending leading to declining income leading to declining spending….Keynes was right. Scott Sumner was also right to call for more aggressive monetary policy in 2008-2010. "

I'll be ecstatic if we can just agree about this, so that we take the actions we need to with enough immediate force next time.

Seems to me that the downsides of a more aggressive monetary policy would have been small, so why not do it? They clearly had a mandate since inflation was below their target. It seems to me that Tyler is making apologies on behalf of the Fed, in essence excusing their failure. Why?

You have to ask Alex, not Tyler.

Correct as a casting of doubt (although not a total refutation) oo the idea that there may not still be some "out of equilibrium" unemployment. [The price level is still below its level if the Fed had hit its "inflation" targets since 2008 and inflation adjusted bond yields suggest that market expectations are still below 2% p.a. and the prime age employment ratio is still below its maximum]
The larger picture, however remains the same, that the Fed was very much mistaken in not having provided much more stimulus much earlier and winding down QE too soon, before hitting a 2% p.a. PL target.

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