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Fed’s Inflation Fight Is Becoming a Battle Over Jobs, Too

Democrats are pressing policymakers to minimize employment losses amid battle to restore price stability.

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Illustration: Nichole Shinn for Bloomberg Businessweek

In 1994 three unemployed residents of Tucson sued then-President Bill Clinton, seeking to enforce elements of a law Congress had passed 16 years earlier. The 1978 Humphrey-Hawkins Full Employment and Balanced Growth Act established a 4% target for the US jobless rate and directed the White House to work in concert with the US Federal Reserve to achieve it. Unemployment was 6% at the time the plaintiffs, who included a Vietnam veteran and two homeless men, filed their suit. But a provision in the original bill allowing job seekers to sue if they couldn’t find work was left out of the final legislation, which is why the judge presiding over the case threw it out.

Almost three decades later the US job market is about the tightest it’s been in recent memory, with vacancies near an all-time high and unemployment at 3.5%—half a point below the threshold prescribed in the Humphrey-Hawkins Act. Yet the division of labor the law envisages is coming under scrutiny at a time when inflation is running at its highest level since the early 1980s and the Biden administration is looking to the Fed to rein it in, even at the cost of putting Americans out of work.