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Core PCE and Max Unemployment in 2023


In the United States, the agency primarily responsible for maintaining full employment and stable prices is the Federal Reserve System or simply "the Fed", the country's central bank. After two years of zero-interest rate policy in the face of the COVID-19 pandemic, the Fed has since March 2022 been raising interest rates in an attempt to tamp down on inflation. Economists have debated whether these interest rate raises will cause the United States to experience a "hard landing", a "soft landing", or "stagflation". These terms have no single definition, but generally a hard landing would mean that raising interest rates causes the economy to go into a recession, while a soft landing would mean that raising interest rates only causes mild unemployment. Stagflation would mean that high inflation continues but unemployment is also high.

In a Tweet on October 27, 2022, Jason Furman, Harvard professor and former chairman of Barack Obama's Council of Economic Advisors, defined a soft landing as inflation below 3% (using the core personal consumption expenditures (PCE) price index) in the second half of 2023 and a peak unemployment rate in 2023 below 4.5%. The image below is his illustration of the potential outcomes and his categorization of these outcomes.

2023 Economy Outcomes

What will the core PCE and the max unemployment rate be at the end of 2023?

One subquestion will resolve as Yes whose specified ranges of core PCE and unemployment rate match the true outcome. The core PCE will use the seasonally adjusted fourth quarter core PCE in 2023 as shown on this chart. The unemployment rate will be the highest monthly unemployment rate in 2023 shown on this chart, also known as U-3 unemployment or headline unemployment. All other subquestions will resolve as No.

The symbol indicates the value is greater than or equal to the indicated value. Values will be taken as the rounded values shown on the charts used as the resolution sources linked above.

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