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Opinion
Tim Duy

Recession Lurks in Fed's Bullish New Jobs Forecasts

Unemployment is low and getting lower. To get it back up to a sustainable level, the Fed could trigger the next downturn.
The unemployment rate could rise.

The unemployment rate could rise.

Photographer: Luke Sharrett/ Bloomberg

There is a recession in the Federal Reserve’s forecast. You won’t see it in the growth projection, but it's staring you in the face in the unemployment forecast. And it’s a doozy.

The Fed’s Summary of Economic Projections, or SEP, released at the end of this week's Federal Open Market Committee meeting, projects an unemployment rate of 3.9 percent at the end of 2018. This is well below the Fed’s current estimate of the longer-run rate of unemployment, equivalent to NAIRU, or the non-accelerating inflation rate of unemployment, which remained at 4.6 percent.