Friday, April 5, 2019

Unemployment rate holds steady at 3.8%

The unemployment rate reported today held steady at 3.8%, which continues to show that the dynamic information equilibrium model is better than forecasts from FRBSF, the FOMC, the CBO, and Paul Romer (click to enlarge):




I would like to give plaudits to Tim Duy and his observation about the Fed's reaction function:
It’s something I have been blind to - as long as inflation is not a problem, the Fed doesn’t hike rates when unemployment is flat (which is their forecast). This even held as recently as 2016.


The recent flattening of the unemployment rate data and the Fed's lack of hikes bears this out.

...

As a side note, it was probably a bit brash to put a forecast in my paper — but it has turned out pretty well (click to enlarge):




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