Kathryn Dominguez, Marketplace: Generally speaking, if more and more people are employed and the unemployment rate drops and drops further, companies may have trouble finding workers, and they’ll raise wages to attract them. That would increase their operating costs, and eventually they’ll turn around and pass those costs on to customers in the form of higher prices. The Fed’s goal is to get as many people employed as possible without letting that happen.
“It doesn’t necessarily mean that everybody is employed,” said Kathryn Dominguez, a professor of public policy and economics at the University of Michigan. “It means that everyone is employed that could be employed without leading to higher inflation.”
Kathryn Dominguez, at the University of Michigan, said the reality is the Fed is doing that with inflation too, even though it does have that 2% target.
“Even that is not straightforward,” she said. “It’s more straightforward than the maximum employment mandate, but even on the inflation side, we have a lot of different measures of prices.
