Inflation has tumbled from its peak of 9.1% in June 2022 to 3.7% on the back of the Fed’s rate hikes. Yet the unemployment rate, at a still-low 3.8%, has scarcely budged.
Grim forecasts from economists had predicted that as the Federal Reserve jacked up its benchmark rate ever higher, consumers and businesses would curb spending, companies would slash jobs and unemployment would spike as high as 7% or more — twice its level when the Fed began tightening credit. Unemployment shot to 10.8%, which at the time marked its highest level since World War II.
Economists predicted last year that the Federal Reserve jacking up interest rates to combat inflation would result in higher unemployment rates but that hasn’t happened. The central bank may be on track to achieve a rare and difficult “soft landing.”