Why isn’t the inflation monster right upon us? Well, for one, central banks only pretend to do money. But setting that aside, it’s worth asking how even if they did do money, could inflation result given the current conditions?
It’s a combination of enormous macro slack joining destructive forces with the underside of the permanent income hypothesis. The point of unemployment insurance is to reduce the negative effects for those who face a loss of income. While it won’t be the same coming from Uncle Sam (and his state nieces and nephews), it’s at least a steady payment.
Unemployment aid isn’t supposed to be permanent, however, since recoveries are believed to just happen; organic and symmetrical. An end to a recession necessarily produces an end to the macro slack limiting employment. On the way back up, unemployed persons naturally regain meaningful employment and roll off government assistance. Read more…..
Chart of the Day
In a devastating blow to the already-stalling economic recovery, 140,000 were lost last month, according to the Labor Department. The overall unemployment rate held steady while Black and Latino communities were hardest hit.