OBSERVING CORE INFLATION, UNEMPLOYMENT RATE AND NON-CYCLICAL RATE OF UNEMPLOYMENT, VERY SIMPLE GRAPHS EXPLAIN A LOT. EVERY TIME THE UNEMPLOYMENT RATE HAS RUN BELOW NAIRU, THAT HAS ACCELERATED INFLATION AND GENERATED ABOVE POTENTIAL TREND GROWTH. TEXBOOK ECONOMICS. IN THE GRAPH IS POSSIBLE TO SEE HOW IN OCTOBER 2021 UNEMPLOYMENT RATE WAS 4.4% BELOW NON-CYCLICAL UNRATE 4.5%, THEN THERE HAS BEEN STRUCTURAL VERY LOW UNEMPLOYMENT 3.5%, THAT IS AN ACCELERATING INFLATION LEVEL OF UNEMPLOYMENT. TIGHT LABOUR MARKET, THERE ISN’T ANY SPARE CAPACITY

THE FEDERAL RESERVE HAS INTERPRETED THE STRONG LABOUR MARKET AS AN ACHIEVEMENT OF MONETARY POLICY MANDATE OF FULL EMPLOYMENT, THAT’S AWESOME. HOWEVER, THE TIGHT LABOUR MARKET HAS SEEN A FORCED BID ON EVERYTHING: PRICES, WAGES AND FACTORS OF PRODUCTION. THE GRAPH EXPLAINS HOW AFTER OCTOBER 2021 UNEMPLOYMENT BEGAN TO DRIFT STRUCTURALLY LOWER TOWARD 3.5%, THEN THERE’S THE BLUE LINE COMING FROM UNDERNEATH SKYROCKETING HIGHER, THAT’S CORE INFLATION. INDEED, IN THE FUTURE AS CORE INFLATION REGRESSES TO THE MEAN, THE UNEMPLOYMENT RATE HAS BEEN SLOWLY TICKING UP FROM 3.5% TO 4% CONVERGING TOWARD THE NON-CYCLICAL RATE OF UNEMPLOYMENT OF 4.4%. WE CAN ALSO SEE THAT AFTER THE ECONOMY RUNS FOR MANY QUARTERS ABOVE POTENTIAL TREND GROWTH, THEN INFLATION GOES HIGHER, YIELD CURVE INVERTS AS A FUNCTION OF THE CENTRAL BANK RAISING SHORT-TERM MONEY MARKET INTEREST RATES TO ACHIEVE REAL 2.0% YIELD DISCOUNTED FOR THE RATE OF INFLATION, THEN UNEMPLOYMENT RATE STARTS TO DRIFT HIGHER. THEREAFTER THE SHADED AREA POPS UP WHEN THE (U2) UNEMPLOYMENT RATE LINE CROSSES THE NON-CYCLICAL UNEMPLOYMENT LEVEL. HENCE, IT’S REASONABLE TO EXPECT A SLOWDOWN OF THE UNITED STATES ECONOMY, AND EVEN DECELERATING ECONOMIC GROWTH, WHICH COMES ALONG WITH A DECREASING INFLATION RATE. THIS PART OF THE ECONOMIC CYCLE HAPPENS WHEN AFTER OVERHEATING THE ECONOMY, HIGHER PRICES AND HIGHER WAGES AREN’T CLEARED, MARGINAL BUYERS DON’T SPEND, SO TO KEEP THE SAME LEVEL OF HIGH PRICES, BUSINESSES TRY TO REDUCE OUTPUT, AND REDUCE THE COST OF PRODUCTION BY START SHEDDING HIGHER WAGES EMPLOYEES. THERE WAS A STARTING WAVE OF HIGH-PROFILE LAYOFFS IN BIG TECH AND SOME BANKS. THIS WILL WORK THROUGH THE ECONOMY UNTIL THE U.S. UNEMPLOYMENT RATE GOES BACK UP TO 4.4% AND PROBABLY ABOVE THEN THE SHADED AREA OF RECESSION COULD POP UP. IMPORTANT TO DISCERN, WOULD BE THAT A CYCLICAL UNEMPLOYMENT RATE (U2) OF 4.0% CONVERGING TOWARD THE NON-CYCLICAL UNEMPLOYMENT RATE OF 4.4%, STILL COULD BE CONSIDERED ACCEPTABLE LABOUR MARKET SUPPLY/DEMAND EQUILIBRIUM, ADJUSTING TO ECONOMIC GROWTH THAT DRIFTS TOWARD POTENTIAL OUTPUT AND EQUILIBRIUM BETWEEN LONG RUN AGGREGATE SUPPLY OUTPUT, VALUE ADDED GROWTH AND AGGREGATE DEMAND.