I have been writing some manuscript comments about labour market capacity constraints and inflation, which I hinted at in my previous article. One tangent that came up that will not fit the manuscript is the behaviour of the employment-to-population ratio. Although the argument that the “labour market overheating is a major component of sustainable domestic inflation” is quite plausible, the problem is defining “overheating.” If we want to tell stories about the back history, we can pick and choose data as we wish. But it we want to make quantitative forecasts — which is what you need for a falsifiable theory of inflation — you need some variables to feed into your model.
Employment-Population Ratio Revisited
Employment-Population Ratio Revisited
Employment-Population Ratio Revisited
I have been writing some manuscript comments about labour market capacity constraints and inflation, which I hinted at in my previous article. One tangent that came up that will not fit the manuscript is the behaviour of the employment-to-population ratio. Although the argument that the “labour market overheating is a major component of sustainable domestic inflation” is quite plausible, the problem is defining “overheating.” If we want to tell stories about the back history, we can pick and choose data as we wish. But it we want to make quantitative forecasts — which is what you need for a falsifiable theory of inflation — you need some variables to feed into your model.