Philip N Jefferson: Do non-inflationary economic expansions promote shared prosperity? Evidence from the US labor market

Speech by Mr Philip N Jefferson, Vice Chair of the Board of Governors of the Federal Reserve System, at Swarthmore College, Swarthmore, Pennsylvania, 5 February 2025.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Figures accompanying the speech

Thank you, Professor O'Connell, for that kind introduction and for the opportunity to talk to this group.¹ I am delighted to be back at Swarthmore College. This special community brings back fond memories of fantastic students, great colleagues, and pedagogical excellence.

Yesterday, I discussed my outlook for the current U.S. economy. I highlighted how the economy is growing and appears to be roughly in balance, with low unemployment and declining inflation. Today, I will review some of the historical evidence pertaining to periods when the Federal Reserve has achieved both components of its dual mandate, maximum employment and stable prices, on a sustained basis-that is, periods of long non-inflationary economic expansions. My title question is whether economic evidence indicates that such expansions also result in greater shared prosperity.

My focus will be on the labor market. A reason for this focus is that for many individuals, their employment attachment is a key determinant of their household's overall well-being. My approach will be to compare the current labor market with the labor market at the end of 2019-that is, at the end of the most recent long, non-inflationary expansion. Such a comparison provides a lens through which to view the prospects for broadly shared prosperity fostered by the current U.S. labor market.

The remainder of my talk is organized as follows. First, I describe the labor market at the end of 2019. After that, I discuss the state of the labor market in the immediate aftermath of the COVID-19 pandemic. Then, I describe the current labor market situation. Next, I discuss possible reasons why strong labor markets facilitate broad-based prosperity. Before concluding, I consider whether the benefits of long expansions are persistent.