he Coming High-PressureEconomy

After hunkering down for much of 2020, people are eager to make up for lost time. Much the same can be said of policy-makers, who are taking action to recoup lost economic output and return to maximum employment as quickly as possible. To get there, we think they are aiming for a high-pressure economy – an environment of stronger-than-average economic growth that helps to reduce unemployment. That's exactly where we think the US economy is headed in the coming quarters.

Based on the experience of the past cycle, policy-makers believe that a high-pressure economy can help them to achieve a broad-based and inclusive economic growth environment. With the low rates of headline unemployment during 2017-19 came better employment opportunities for lower-income households. Even undershooting the estimated natural rate of unemployment failed to produce substantial inflationary pressures, and the natural rate of unemployment saw regular downward revisions.