NAIRU
It was not a good Friday for many, though it was OK with me. I got a chance to hire a great kid to help out on my program, since the government isn’t hiring at the moment. Makes me happy one of my kids has a government job- that is an outstanding place to be at the moment. The Bureau of Labor Statistics- another fine government institution- reported that the unemployment rate in October jumped to the highest level since 1994- the year of the Republican Revolution.
That is a quarter million jobs gone in that month alone, the tenth straight month the country has shed the number of gainfully employed. The rate of unemployment has climbed to 6.5%, which would be bad enough, but it doesn’t include those who have already given up on looking.
I learned that back at the Industrial College where I got my masters degree. We had to take the micro-macro economics sequence to graduate, and the Chairman of the Department taught us. We actually got a free pass, since in the Spring of 1998 the laws of economics had been repealed, or at least seemed to have been.
No one had a good explanation for it. It was new and different, and presumably disconnected with the world before the internet, which had been disconnected. We were wired, and there was nothing to stop the boom. As far as we could tell, anyway.
As our professors attempted to assimilate a New World with unlimited hope, we studied the NAIRU, among other things, which referred not to the unlamented jacket of 1960s fame, but the Non-Accelerating Inflation Rate of Unemployment.
It was a curious thing, since it seemed to have been repealed along with everything else we had learned in the 1970s, but it was on the curriculum, and had to be taught. Consequently, I was not paying a great deal of attention- the subject verged on the complexity of derivative finances and I had no idea how thoroughly the whole thing was going to ruin us. But, for the purposes of discussion, the NAIRU was theory that lived at the junction between macro and microeconomics.
It held that "full employment" really meant that about 5% of the workforce wasn’t working. The actual number was in dispute- but the point was that if unemployment fell below the magic number, the increased demand for workers made inflation kick in.
We were all deathly afraid of that, since “stagflation,” stagnant wages amid high inflation, had been the bane of the Nixon-Carter years.
NAIRU was sometimes referred to as the "natural rate of unemployment," as if there were something natural about sitting around on your ass.
Oh well, we all passed the course, even if the Professor could not explain why the curves and models did not seem to be working.
I imagine we will all pass this, too, and may actually be seeing the bottom of this one as well. Unfortunately, the President-elect will have to strap on a lot of angst, and a lot of accumulated debt that will make inflationary pressure severe and the recovery a slow and ponderous thing.
We have always said we were pretty much unemployment-proof here in Washington; the local rate in the Virginia suburbs has hovered around 2% for years, which is effectively full employment. In my line of work, the only reason to be unemployed is that you want to sleep more.
Even here though the jitters are starting to come through. The government itself has the heebie-jeebies, so a lot of young people with clearances have been cast adrift.
If it is unsettling here, it must be really panicky back in rust-belt states like Michigan, where they are talking about GM and Ford going out of business by Spring if they don’t get a bail-out from the government.
Looking back on it, of course, the unemployment rate is why Mr. Clinton got elected, and why his party was turned out of the majority in the Congress the very next cycle, so none of this should come as a surprise. It really is “The Economy, Stupid.”
Unfortunately, we have chosen to have our little collapse in the midst of two unresolved conflicts overseas. Considering the challenge, I was not surprised to see the headlines from overseas. Some al Qaida apologists were crowing that the Great Satan had been brought low by their valiant struggle. Another commented on the historic nature of what we have done: “African American selected for worst job in US.”
Best intentions aside, the world has a way of not cooperating with what we want to do.
I listened to a replay of the first press conference of the rest of President Obama’s life on C-SPAN radio on Friday. This national security thing is still awfully new, and having the solemn face of Admiral McConnell in front of you is always sobering, in my experience. Mike tells it exactly the way it is, and there is a lot of it to tell this week.
The new President traveled to the FBI regional office on W. Roosevelt Street to brief the President-elect. Mike had no comment when it was over, of course, but the media asked Senator Obama what he thought about it.
Q: You are now privy to a lot of intelligence that you haven't had access to before, in fact, much of what the president sees, I'm sure all of it.
First of all, do you…what do you think about the state of U.S. intelligence, whether you think it needs beefing up, whether you think there's enough interaction between the various agencies? And, second of all, has anything that you've heard given you pause about anything you've talked about on the campaign trail?
OBAMA: Well, as you know, if ... if there was something I had heard, I couldn't tell you. But… I have received intelligence briefings. And I will make just a general statement: Our intelligence process can always improve. I think it has gotten better. And, you know, beyond that, I don't think I should comment on the nature of the intelligence briefings. That was a two-parter. Was there another aspect to that?
Q: Well, just whether...you know, absent what you've heard...
OBAMA: OK, I get you.
Q: ... whether anything has given you pause.
OBAMA: I'm going to skip that.
My pal Joe is not a plumber, but he has a knack for leaks. He was the first to pounce on it. He said It was a safe answer, even if not quite as polished as Margaret Thatcher’s well-practiced response to intelligence-related matters raised during Prime Minister’s Question Time: “The right honorable gentleman is aware that we do not discuss such matters in this House.”
’s woes, it makes you wonder who would ever have asked for The Worst Job in America.
Copyright 2008 Vic Socotra
www.vicsocotra.com