Forget the Natural Rate, says the Head of the Minneapolis Fed

Low rates are here to stay

The head of the Minneapolis Fed agrees with something that I discussed several times here (or here for the use of alternative unemployment measures like U6) in the blog, that the unemployment level (U3) is not a good measure of the slack in the labor market. Neel Kashkari says:

No one knows how many more Americans want to work. But if the job market continues to improve with only modest wage growth and below-target inflation, it can be safely assumed that maximum employment isn’t here yet and there is no present need to raise interest rates.

So we're NOT at full employment (neutral or natural rate in their parlance) even with 3.6%. Note that a few years back they thought it was closer to 6%. Reality has an heterodox bias.