In monetary policy making circles an intellectual fight has broken out.
The question is about what effect long-term unemployment has on wage inflation. The main line of thinking is that as jobs become available, the long-term unemployment will come back into the labor force and keep wages from rising. However, a study from the NY Fed this week said short-term unemployment is a better gauge.
To me it sounds like the first step toward disregarding the long-term unemployed and accepting that the crisis caused a structural shift in the economy but what’s more important is that if the wonks are arguing about something like this (and we’ll never get a real answer), then the global economy is in good shape.
