Thread by @LHSummers

Extraordinary new analysis from @SFFED judges that labor markets are now far tighter than normal, in fact tighter than anytime since 1968. This is a valid inference from the vacancy unemployment ratio on which they rely.

frbsf.org/economic-resea…

Further the study attributes the tightness dominantly to the multiplier effects of the early 2021 measures, corroborating concerns some of us had at the time.

Remarkably, despite rejecting the prevailing Fed view that slack remains a primary concern, the authors manage to be serene about inflation. Never before has the late 1960s been suggested as a time of successful macro management.

To reach a Fed congenial conclusion they ignore (i)1968 historical experience of inflation (ii)surveys like Fed's own that now show ratcheting up multi-year inflation expectations (iii)pervasive evidence of bottlenecks & biz purchasing power (iv)soaring commodity & housing prices