Federal Reserve Rooting For Higher Unemployment Rate

Dayana Sabatin

Photo by Anna Shvets:

Jerome Powell, the Federal Reserve chair, says that while it will bring pain, a "growth recession," is necessary to fight inflation.

A "growth recession" is a period of slow economic growth and higher unemployment. Essentially, this means that any Americans who are about to return to the labor market and/or are looking for a new job will feel an incredible amount of pain.

"Reducing inflation is likely to require a sustained period of below-trend growth, and there will very likely be some softening of labor-market conditions," says Powell.

A growth recession will drive the unemployment rate higher as numerous companies are laying off employees.

David Rubenstein, a billionaire investor and co-founder of The Carlyle Group, told CNN that the Fed is actively rooting for the unemployment rate to go up to get inflation under control.

"He can't quite say this, but if the unemployment rate goes up to 4% or 5% or 6%, inflation will [probably] be tamed a bit," Rubenstein said of Fed Chairman Jerome Powell, whom he hired a quarter-century ago to work in private equity, "But he can't come out and say, 'I hope the unemployment rate goes up to 6%.' That doesn't sound politically very attractive to say that."

Fed officials have stated the jobs market is too strong right now and is contributing to the very high cost of living.

In order to cool inflation, the Fed is increasing interest rates at the fastest pace in decades. The goal is to ease the demand for workers, bringing the jobs market more into balance and taking pressure off prices.

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