02/07/2022

The U.S. on the Road to 1950s-style Unemployment

But it may only be a pit stop

The last time the U.S. unemployment rate fell below 3 percent, as one Federal Reserve official has predicted it will this year, the Korean War was nearing its end and a recession that saw legions of workers lose their jobs was just around the corner.

While the circumstances were unusual, it nonetheless presented a now-familiar pattern - a falling unemployment rate eventually giving way to recession - that current Fed officials will be challenged to avoid as they try to slow the fast pace of inflation without wrecking an expansion that is delivering strong gains for workers.

Emblematic of the current confidence in the job market's strength, St. Louis Fed President James Bullard last week said he expects the U.S. unemployment rate to fall below 3 percent this year. That flashback to the 1950s in itself would be a warning for some economists.

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