I think that’s part of the explanation of the “soft landing.” Back during the inflationary spurt in 2022, nominal wages were growing very rapidly. The public sector struggles in that kind of situation, because it has much less flexibility to offer opportunistic wages or to pay new hires differently from old hires. So a bunch
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I think that’s part of the explanation of the “soft landing.” Back during the inflationary spurt in 2022, nominal wages were growing very rapidly. The public sector struggles in that kind of situation, because it has much less flexibility to offer opportunistic wages or to pay new hires differently from old hires. So a bunch of people probably left their jobs when they realized that they could get raises by going elsewhere, and governments had a hard time replacing them. Then, when the economy cooled in the face of the Fed raising interest rates, there was this long hangover of public sector vacancies that started getting filled even without big pay increases. Even today, though, lots of jurisdictions have outstanding vacancies — you hear about this especially with police officers and teachers, but it’s impacting lots of categories of employment.
That is from Matt’s Friday (gated) column which is about many things, including what the world would have looked like if the American Revolution had not gone forward. This particular point is a good one, and worth further investigation.
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Economics
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