Tax cuts, deregulation and more federal spending advocated by the incoming Trump administration are a classic remedy for economic stagnation and long unemployment lines.
But that medicine may be too strong for an economy that has grown for eight years, with wages now rising and the jobless rate near what many economists consider “full” employment.
A Reuters analysis of regional jobs data and historic trends suggests that stimulus could boost demand for workers in areas where labor is already tight. That in turn, could stoke inflation, force the Federal Reserve to raise rates faster than expected, and make recession a greater threat.
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