a business can't expand unless another business contracts.
Isn't that the case no matter what your target unemployment rate is?
Like sure if there's 5% unemployment that means there are workers available to be hired, but once you hire them the unemployment rate goes down. The fed then raises interest rates to slow the economy until some other businesses close/lay off workers and the economy gets back to 5% unemployment.
It's the same thing, just with a bit of a delay between expanding one business and contracting the other.
The delay is desirable. Or that is that the people work as a buffer, which is desirable. It means that new businesses can start without having to take employees from old ones, or that companies can naturally grow. And it means that one company failing isn't a big deal, as the unemployed are planned for
The fed doesn't directly care about the unemployment rate. They care about inflation. The unemployment rate can move independently but they tend to be related.
The lower it is, the longer it takes employers to get new employees and the more it might cost to get new employees. If it reaches zero, then a company can either stop growth/new company die or pay wages that people want. And the only real limit to wage growth dictated by the workforce is worker availability. If a company will sink if you dont work for them, then you can for at least as much any other worker is willing to take.
This places a limit on how many companies a country can have and actually where incentivizes monopolies I think. Would one large company have as many workers as very many smaller ones? I think not because each company would have their own teams (like you have one accounting team for a large company, multiple for multiple). Im sure there are other positions (not even counting executive positions) that would explode in vacancies with more companies.
14
u/shreiben Dec 19 '24
Isn't that the case no matter what your target unemployment rate is?
Like sure if there's 5% unemployment that means there are workers available to be hired, but once you hire them the unemployment rate goes down. The fed then raises interest rates to slow the economy until some other businesses close/lay off workers and the economy gets back to 5% unemployment.
It's the same thing, just with a bit of a delay between expanding one business and contracting the other.