The Fed’s dual mandate is full employment and inflation at 2%, but response rates to both labor market surveys and inflation surveys continue to decline, see chart below. Measurement problems are particularly problematic when both inflation and unemployment are not near the Fed’s desired goals of 2% inflation and 4% unemployment.
The homework for markets is to compare the outcome of different surveys such as the Employment report with Jobless claims and JOLTS data, where all data at the moment tell the same story of significant overheating in the labor market.
The bottom line is that the economic data is becoming more unreliable, causing more volatility in the incoming data and hence more volatility in markets.
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