since the onset of the pandemic and a decomposition of excess savings across income quartiles, see aditya aladangady, david cho, laura feiveson, and eugenio pinto ( 2022 ), “ excess savings during the covid - 19 pandemic, ” feds notes ( washington : board of governors of the federal reserve system, october 21 ), https : / / doi. org / 10. 17016 / 2380 - 7172. 3223. romer and romer ( 2004 ) and gertler and karadi ( 2015 ) find that it takes about 9 and 12 months, respectively, for monetary policy actions to begin to affect inflation and additional time for that effect to - 3monetary policy, the lagged effects of earlier accommodation likely offset some of the initial effects of tightening over the course of 2022, and it is likely that the full effect on demand, employment, and inflation of the cumulative tightening that is in the pipeline still lies ahead. that said, there is uncertainty about the timing and magnitude. with that in mind, let ’ s turn to the implications for the employment leg of our dual mandate. in contrast to the slowing of output growth, labor markets remained tight throughout 2022, with layoffs remaining below pre - pandemic levels and the unemployment rate ending the year at 3. 5 percent, its historical low. quit rates and the ratio of job postings to job seekers also remain elevated, although they are off their peaks from early in the year. recent declines in average weekly hours, temporary - help services, and monthly payrolls growth suggest tentative signs that labor demand is cooling. employment at temporary - help services firms — a good leading indicator — peaked in july 2022 and has been declining since then, ending the year only slightly above its december 2019 level. similarly, average weekly hours have declined : after peaking in early 2021 and peak. in contrast, bauer and swanson ( 2022 ) find that inflation effects from monetary policy occur much sooner and peak within the first 10 months. see christina d. romer and david h. romer ( 2004 ), “ a new measure of monetary shocks : derivation and implications, ” american economic review, vol. 94 ( september ), pp. 1055 – 84 ; mark gertler and peter karadi ( 2015 ), “ monetary policy surprises, credit costs, and economic activity, ” american economic journal : macroeconomics, vol

helps to create a form of " automatic stabilizer " operating in financial markets ; as the economy is buffeted by shocks, market participants anticipate how the central bank is likely to move short - term interest rates in the future, and these expectations are then immediately reflected in movements in long - term interest rates that help to counteract the effects of the shocks. well, i hope by now i've convinced you that the fomc's announcements - - though sometimes criticized as terse or inscrutable - - are in fact the embodiment of nearly every major change in the u. s. monetary policy framework in the last twenty - five years. not bad for a one - page document. having talked at some length about the broad conceptual framework underlying last week's fomc announcement, i'd like to now turn to what it actually said. a key passage of the announcement read as follows : the committee continues to believe that an accommodative stance of monetary policy, coupled with still - robust underlying growth in productivity, is providing important ongoing support to economic activity. however, incoming economic data have tended to confirm that greater uncertainty, in part attributable to heightened geopolitical risks, is currently inhibiting spending, production, and employment. those two sentences succinctly summarize the important crosscurrents that the fomc must take into account in the current environment. on the one hand, the current very low setting of the target funds rate is undoubtedly imparting considerable economic stimulus. moreover, the u. s. economy has proven to be remarkably resilient in recent years, and underlying economic trends such as continued strong productivity growth bode well for economic prospects in the longer run. indeed, the latest productivity data released just last week showed yet another very substantial increase in labor productivity in the third quarter. while some of the recent outsized increases in productivity may prove to be temporary, the recent data do suggest that underlying trend productivity growth remains quite buoyant, and that, in turn, should ultimately show through to stronger incomes for households and an improved profit outlook for businesses. on the other hand, the u. s. economy has been beset by a string of adverse shocks in the last two years, and the fomc last week expressed its concerns that the lingering effects of those shocks and the uncertainty about the economic outlook were factors hindering the economic recovery. as noted in the minutes of several