The labor market’s performance refutes a central element of Modern Monetary Theory’s license for government spending.
Unemployment fell to 3.5 percent in July, the same historically low level as February 2020. The labor market remains strong despite high inflation and a seeming impending recession. The labor market’s performance refutes a central element of Modern Monetary Theory’s (MMT) license for government spending.
The unemployment rate excludes persons not seeking jobs, so economists also consider the labor force participation rate and the employment to population percentage. A smaller proportion of Americans work now than in 2020. Labor force participation fell from 63.4 to 62.1 percent and the employment rate fell from 61.2 to 60.0 percent.
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