Rising productivity and foreign labour to boost US GDP

Significance The easing of pandemic-related supply chain disruptions assisted the Fed, alongside the withdrawal of pandemic-era fiscal stimulus. The Fed is now inclined to shift its focus to the labour market, where strong demand has been met by rising productivity and the increased supply of foreign workers. Impacts Supply chain strains accounted for 40-60% of 2021-22 inflation and their easing aided the soft landing, but further strains are a risk. A notable risk persists that demand for workers could outpace supply and higher nominal wage growth could translate into higher inflation. Recent public comments by Fed officials indicate that the central bank will now focus more on labour markets than inflation.