The big issue with tying the FFR to unemployment is for years large companies could outbid SME enterprises for talent. Even with higher interest rates and the large layoffs in the last three months, all of these "relatively productive" people will rotate to SME with reasonable similar perks. The productivity gains in all of these small and medium sized companies in the next 5 years in going to surprise a lot people. It would not surprise me at all if small caps outperform even high flying tech/oil co. in a recession even with higher capital costs. Bonds on the long end of the curve will be gobbled up if then then get back above 4%. This may actually give the Fed some space for a "market/economy" driven multi year soft landing as opposed to the Greenspan *****ing the bubble recession.
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