Why central banks want more people to lose their jobs

In the US, for example, the jobless rate in January dropped to 3.4%, the lowest level since 1969.

Though it sounds like good news, the US Federal Reserve, aka the Fed, thinks unemployment is too low.

When unemployment is too low it becomes harder for companies to find new employees. So, to attract staff, businesses offer higher salaries.

To compensate for higher personnel costs, businesses need to raise prices on the products they sell. That adds to inflation.

The challenge for the Fed and other central banks is to find the right level of unemployment.

If interest rates raise costs too much and too many people lose their jobs, it could lead to a deep economic slowdown or recession that would worsen people’s quality of life.

Reference shelf:
It Could Be Harder to Find a Job and Get a Pay Raise if the Fed Gets Its Way (TIME)

Jobless claims fall for 3rd straight week, raises specter of more interest rate hikes (PBS)

The Reserve Bank wants unemployment to rise. It should be careful what it wishes for (The Guardian)

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