First things first: March’s Employment Situation report from the Bureau of Labor Statistics unveils another month in a growing string of impressive jobs gains. The U.S. economy added 295,000 jobs, and the unemployment rate fell to 5.5 percent in February. Over the past 6 months, the economy has added an average of nearly 300,000 jobs per month. But how long can the economy keep doing this? And how will the Federal Reserve respond?
There are some legitimate questions about whether the economy can keep adding jobs at a rapid clip without setting off inflation. Surely it stops at some point. But since there is so little precedent for recovering from such a steep recession, there will be considerable policy uncertainty for some time. Absent clear precedent, the Fed has to go back to first principles—the ones everyone learned in Econ 101—to figure out what comes next.
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