(1992), Central Bank Strategy, Credibility, and Independence: Theory and Evidence, The MIT Press. Darracq Pariès, M. and Notarpietro, A., (2008) “Monetary policy and housing prices in an estimated DSGE for the US and the euro area,” ECB Working Paper No. 974.
Put simply, the strong demand for labour has been met by more labour supply. It is useful to consider the following thought experiment. Suppose the participation rate had still risen materially, but by ¾ per cent, rather than 1½ per cent. All else constant, this would have meant the unemployment rate today would have been well below 5 per cent.