BIS thinks we’re near international full employment

The BIS thinks that economic growth must slow or inflation will get out of control. They think

there was little or no slack left for rapid non-inflationary expansion.

They obviously haven’t seen

  • the very low inflation rates in the US, particularly when you consider core inflation, the best measure of future inflationary pressures
  • unemployment at a 17 year high in the UK (8%).
  • But mostly they aren’t looking at the graph below of high unemployment in the US, including damagingly high unemployment in the important 20 to 24 age group (below)
Unemployment is very high, and the long-term damage to the economy and the just-starting careers of 20 to 24 year olds is marked.

The graph below shows a rebound in growth in retail sales volumes, but if you follow the previous trend upwards, a clear output gap is evident. Output gaps (from full employment / potential to actual employment) reflects an economy far away from overheating.

Retail sales have not caught up to long term growth rates reflecting a gap between current sales and potential sales (full employment)

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