Jay Powell, Phillips, Paul Volker discussed on Morning Edition
It's morning edition from NPR news. I'm Rachel Martin. And I'm David Greene. Three of the most important economists in this country sat down for a panel at an economic conference in Atlanta last week, former fed chair, Ben Bernanke and Janet Yellen along with the current pitcher Jay Powell were talking shop and also talking about the latest jobs report, but his Cardiff Garcia and Stacey Vanik Smith planet money podcast, the indicator. Tell us a stellar jobs report is not always a good thing. It was a pretty stellar report. Three hundred twelve thousand jobs added in December strong wage growth. And of course, unemployment is still below four percent. And then here's Jay Powell's response. That's quite welcome. And also for me at this time does not raise concerns about to high inflation does not raise concerns about to high inflation that seems like a weird comment to make right? We added all these jobs, but that doesn't mean I'm worried about inflation. But economists discussed the relationship between unemployment and inflation all the time that relationship is sometimes. For you as the Phillips curve. And that's this idea that if enough people are working it will cause inflation that prices of the things that we buy we'll start going up, and according to the Phillips curve, the reverse is also true. So if unemployment goes up then inflation should come down because then companies don't have to raise wages to compete for workers. There's more workers out there who need a job. And we got kind of a test of this back in the late seventies early eighties. Inflation seem to be getting out of control prices were rising up and up and up into get inflation under control, Paul Volker. He was the head of the Federal Reserve at the time raised interest rates all the way to twenty percent by comparison, by the way, short-term interest rates right now are two percent. But we'll Volker did lead to a weaker economy and unemployment went up all the way up to ten percent inflation. No did come down. So everybody's wondering is chair Powell gonna worry about inflation? And is he then going to keep raising interest rates to prevent inflation from spike. Higher for me. At this time does not raise concerns about to high inflation Jerry Palestine, even though unemployment is low and wage growth is rising. It doesn't necessarily mean that higher inflation will follow. So this relationship between inflation in jobs, even though the Phillips curve predicts it Powell's not really seen it. Let's curvy so busy.