The U.S. economy boasts robust growth and slowing inflation despite the highest interest rates in two decades. Such performance isn’t common globally, especially among other advanced economies, revealing crucial differences in the fundamental factors driving inflation and growth.

At first glance, it seems unlikely that the unemployment rate would remain stable if the number of job vacancies decreased. However, such a scenario played out recently as the number of firms seeking to fill positions by poaching employees from other firms increased, while the ranks of the unemployed remained relatively stable.

As money demand changes, and in particular as money velocity fluctuates with interest rates, this relationship can become unstable with money growth providing limited useful information for inflation forecasting.