The wonks have been having a debate.
One side says that workers who have been out of a job for many months are detached from the workforce. They’re so unemployable that they don’t really exist. That they’re not really competing with short-term unemployed workers for jobs.
If that’s true then only the short-term unemployment rate matters.
So the Fed looked into it and after a study concluded that “short and long-term unemployment exert equal downward pressure on price inflation.”
It means the Fed is less likely to see wage inflation as a problem and, as a result, is slightly more likely to keep rates lower for longer.
