MNI: Fed’s Bostic Says Workforce Rebound Helping On Inflation

A recovery in the U.S. labor force has contributed to a faster-than-expected decline in inflation, Atlanta Fed President Raphael Bostic said Monday, in a speech that did not directly address the outlook for monetary policy.

“More recently, the surprises in labor force participation have been to the upside. For example, women have returned to the labor market in force, and have enjoyed some of their highest participation rates in U.S. history,” Bostic said in prepared remarks. “This has contributed to supply increasing more than many expected, feeding a more rapid decline in inflation than many had forecast.”

Policymakers’ views as to how low the jobless rate could go without sparking inflation have changed in recent years, Bostic said. “When I started this job in 2017, the accepted wisdom was that full employment meant an unemployment rate of roughly 4.5%. Well, that’s changed,” he said.

“Outside the brief but severe pandemic recession, unemployment has been below 4.5% for nearly seven years, and in many months by a significant amount. My colleagues have acknowledged this shift,” pointing to a median long-run jobless rate forecast of 4.1% in the FOMC’s Summary of Economic Projections. (See: MNI INTERVIEW: Fed Could Cut By May, Inflation Lingers - Kaplan)

The benefits that accrued to lower wage workers from the pandemic recovery “may have contributed to the increase in entrepreneurship we witnessed during the past several years," Bostic said at a Fed conference.