Yes, but I find for most people unaware of that effect, it just easier to explain the process and that the other side of the coin on inflation is wage and savings deflation. And then ask - who wins and who loses?
Discussion
The NAIRU (Non Accelerating Inflation Rate of Unemployment) is one those other crazy ‘targets’ that the policymakers try to meet. In other words, keep a good proportion of people unemployed for fear of inflation. This means having an excess supply of labour (unemployed people) by reducing demand, by guess what, dialing up or down inflation by tinkering with the money supply. We all know how soul-destroying it is for many people to be unemployed. It’s amazing to think that a 5% unemployment rate is ‘ideal’ to stabilize inflation. What a human cost!
It’s ideal for inflation because it keeps wages suppressed, worker mobility limited, and people easier to replace. Puts corporate profits above people’s ability to make ends meat.
Fuck them
F❌ck em
There are theories that Nairu has been decreasing over last decades, closer to some 3ish % range (US).
Hypothesized cause is the decreasing labor matching frictions thanks to the internet job searches, etc.
Evidence was supposed to be the low inflation despite the very low unemployment in 2010s.
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I think the Nauru theory makes sense; agree that the numbers are arbitrary...
What it's missing is the split of the inflation definitions to monetary vs market driven.
Skewing the markets to overcompensate for the monetary inflation we've created is a pretty basic fail of the Macroeconomics class. And total omission of thinking about what causes the current unemployment rate to differ from Nairu in the first place.
