Today’s employment report continued the pattern we’ve been seeing for a while. Unemployment is falling, and is now very close to previous estimates of the NAIRU, the unemployment rate at which inflation begins accelerating. But inflation isn’t accelerating; in particular, there is still no hint of wage pressure in the data. So what should the Fed do?

My answer is, apply Cromwell’s rule:

I beseech you, in the bowels of Christ, think it possible that you may be mistaken.

OK, maybe skip the bowels part.

The NAIRU is, I’d still argue, a useful concept, mainly because it’s a caution against expecting too much from monetary policy in the long run. Much as I want full employment, there is some lower bound on the unemployment rate, a rate that you just can’t achieve on a sustained basis with demand-side policies. But it’s not very useful as a guide to short- and medium-term policy, because we do not have any good idea of where that lower bound lies.

I very much hope that Fed staff remembers the 1990s. Circa 1994 it was widely believed, based on seemingly solid research, that the NAIRU was around 6 percent; but Greenspan and company decided to wait for actual evidence of rising inflation, and the result was a long run of job growth that brought unemployment below 4 percent without any kind of inflationary explosion. Suppose they had targeted the presumed NAIRU instead; they would have sacrificed trillions in foregone output, plus all the good things that come from a tight labor market.

This time around there is even more reason not to assume that we know where the NAIRU is, because we now know that premature rate hikes can all too easily land you in a low-inflation trap that’s very hard to escape. Think Japan 2000 (an incident I think many people have forgotten), the ECB 2011, Sweden after 2010.

Maybe full employment really is 5.3 percent unemployment, and by the time that’s clear the inflation rate will have ticked up a bit above the Fed’s target. But that would not be a large cost, whereas sliding back into the liquidity trap would be very, very costly. So please, Janet, Stan, and company, think it possible that you may be mistaken.