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Comment by JumpCrisscross | Hacker News Reader

> FED wants unemployment to go up

This is wrong. The Fed doesn’t want higher unemployment. It isn’t even willing to tolerate it. That’s the whole “soft landing” conversation, and why hikes are so hesitant.

The ideal path would be labor market loosening with no more unemployment. Absent structural adjustments, that’s possible. But we need structural adjustments, so layoffs are necessary, which makes the closest to ideal layoffs and immediate reuptake, i.e. constant employment with less wage growth.

A single-mandate Fed would respond to last year’s inflation like Russia did: a sharp, steep rate hike.

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Maybe the reason why people keep repeating it is because that's more or less what Powell keeps saying: "Reducing inflation will likely require a sustained period of below-trend growth, and it will very likely require a softening of labor conditions," (source: https://www.cbsnews.com/news/federal-reserve-interest-rate-h...)

Softening of labor conditions is pretty directly saying "Increase unemployment".

> and why cuts are so cautious.

They're so cautious because they want to hit the right amount of increased unemployment, not that they don't want unemployment to go up at all.

> Softening of labor conditions is pretty directly saying "Increase unemployment"

Not at all. It means less nominal wage growth. That can and does happen without an increase in even job losses, let alone unemployment. (You can have job losses with constant or even increasing employment.)

That seems extremely hypothetical. Sure, in specific anecdotal places/times wages got frozen and employment stayed fixed, but I don't think _anyone_ expects that to happen at a national level if the policy goal of the day is to "soften labor conditions". The expectation is higher unemployment. I think most people understand this.

> seems extremely hypothetical

It’s literally what we’re seeing right now. It’s not the norm, but it’s precedented[1], most recently in America in the 90s.

[1] http://pombo.free.fr/phillips1958.pdf Figure 1

There is a major difference between "this thing we have to do in order to hit our target 2% inflation rate may unfortunately increase unemployment" and "the fed wants layoffs"

Also job numbers have been incredibly good so it's not even generally true unemployment is increasing outside of sectors that are incredibly susceptible to fears of recession.

> There is a major difference between "this thing we have to do in order to hit our target 2% inflation rate may unfortunately increase unemployment" and "the fed wants layoffs"

I don't think that is a major difference to someone who is laid off because of intentional decisions that the fed makes to effect an outcome, knowing that layoffs will be a consequence.

> don't think that is a major difference to someone who is laid off because of intentional decisions that the fed makes to effect an outcome

The difference between being laid off and having job offers versus going onto a growing roll of the unemployed is major. We're not seeing a meaningful increase in unemployment [1][2].

[1] https://fred.stlouisfed.org/series/ICSA

[2] https://fred.stlouisfed.org/series/CCSA

"soft landing" is a hope but if bringing the labor market under control ( higher unemployment ) requires a hard landing or recession the FED is prepared and willing to do that. The whole concept of a soft landing is "well that would be nice but it's not the priority".

You're technically correct, but this seems like a bit of a distinction without a difference. The Fed may not want unemployment, but they do want people to lose their jobs, and an obvious risk of people losing their jobs is that they'll be unemployed. There's no guarantee the Fed will stick the "soft landing."

> they do want people to lose their jobs, and an obvious risk of people losing their jobs is that they'll be unemployed

No, they want less nominal wage growth. The less people lose their jobs, the better. But economies don’t adjust without creaking, which means yes, an expected effect is layoffs and bankruptcies. But the Fed doesn’t want that, and goes to significant lengths, often with negative impact on its price-level mandate, to manage this downside.

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