Rooting for higher unemployment

federal reserve building


AMY SCOTT: It seems counterintuitive. Why would anyone want more people out of work?

Economist Mark Zandi with Moody' says a tight job market drives up wages, and that has inflation hawks at the Fed nervous.

MARK ZANDI: They're concerned that wage pressures are going to boil over and cause businesses to raise prices more aggressively, and that's what they want to avoid. So I think slightly higher unemployment probably would do everyone a little bit of good.

Not everyone agrees. Jared Bernstein with the labor-backed Economic Policy Institute says rising wages aren't the problem.

JARED BERNSTEIN: The inflationary pressures we have seen over the last year or so have unequivocally come from the commodity side of things, from energy costs specifically.

Ben Bernanke and company will weigh all this when they meet next week.

Despite more signs of a slowdown recently, many believe the Fed is still worried enough about inflation to hold interest rates steady.

In New York, I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.


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