Don't Worry About Inflation. Solve the Housing Shortage.

As millennials age into their family-forming years, their tastes are shifting, and the American consumer industry is ready to appeal to them. But while stories about how Scotts Miracle-Gro intends to win over millennial consumers make for fun cocktail-party conversation, there's a more serious question about aging millennial households. Will the economy be able to meet this growing demand from a generation that's getting a late start on traditional measures of adulthood? History suggests the answer is no.

The problem begins with how low the unemployment rate is, at 4.2 percent. That's below the 4.6 percent estimate given by the Federal Reserve as the longer-run projection for unemployment. It's why officials have increased interest rates twice this year, and are likely to do so again in December. They're not looking to cause a recession, but they're acting in a way to slow the economy down somewhat. But why? There's a risk that the Fed will be guided by history and formulas rather than need.