Civilian Unemployment Rate

---

The following perspective is excerpted from a speech given by Federal Reserve Governor Donald L. Kohn at The Federal Reserve Bank Of Philadelphia's Monetary Seminar given in Philadelphia on September 24, 2003. In it he tries to explain how productivity grew in the late 1990's without the unemployment rate being affected significantly:

"It took some time to recognize the upturn in productivity growth in the late 1990s and to understand the effects it was having on the economy. What we observed was very strong growth in output accompanied by a decline in the unemployment rate, but that decline was smaller than would have been anticipated based on previous estimates of the rate of increase in the economy's potential. We also saw that the response of prices to the drop in the unemployment rate was considerably more damped than might have been expected given historical relationships; in fact, some measures of inflation decreased in circumstances in which previous statistical regularities suggested that they ought to have been moving higher. Of course many things were going on at the time, but one hypothetical change that seemed to solve a number of these puzzles was a rise in the trend rate of productivity growth. It explained the slow pace of the drop in the unemployment rate. Moreover, it made the behavior of inflation more understandable because the productivity gains seemed to take a while to feed through to higher growth of labor compensation in labor markets and thus lowered business costs initially."

http://www.federalreserve.gov/boarddocs/speeches/2003/20030924/default.htm

---

The following is excerpted from a statement given by Commissioner Kathleen P. Utgoff of the Bureau Of Labor Statistics. It was released on October 3, 2003. In it she presents a snapshot of the employment situation as of September:

"The unemployment rate held at 6.1 percent in September. Nonfarm payroll employment was little changed (+57,000) over the month at 129.9 million. The pace of job loss in manufacturing eased somewhat. In September, factory employment was down by 29,000 compared with an average monthly drop of 54,000 for the prior 12 months. The manufacturing workweek (40.4 hours) and factory overtime (4.2 hours) each increased by two-tenths of an hour over the month. Employment in temporary help services rose (+33,000 in September) for the fifth consecutive month. Since April, the industry has added 147,000 jobs. Elsewhere in professional and business service industries, architectural and engineering services employment increased over the month.

"In retail trade, employment rose at both motor vehicle and parts dealers and in building material and garden supply stores. Thus far this year, the monthly pace of job growth in the latter industry has accelerated relative to 2001 and 2002, likely reflecting home building and improvement activities. Construction employment continued to trend up over the month and, since February, has increased by 137,000.

"Employment in the health care industry, typically one of the strongest areas of growth, was essentially unchanged over the month. With few exceptions, employment in most other industries was little changed in September. Many labor market measures from the household survey showed little movement over the month. The unemployment rate remained at 6.1 percent, and the civilian labor force and employment were flat. However, the number of unemployed who had been searching for work for 27 weeks or more rose to 2.1 million. In addition, the number of persons working part time because of business and economic conditions increased to nearly 5 million. The total count of persons at work part time, however, was essentially unchanged at 24.0 million. In September, the employment-population ratio was 62.0 percent, down a percentage point from a year earlier."

http://stats.bls.gov/news.release/jec.nr0.htm

---

The following is excerpted from a speech given by Federal Reserve Governor Ben S. Bernanke at the Annual Washington Policy Conference of the National Association of Business Economists in Washington, DC on March 25, 2003. In it he discusses the interplay between the unemployment rate and inflation:

"The maintenance of price stability--and equally important, the development by the central bank of a strong reputation for and commitment to it--also serves to anchor the private sector's expectations of future inflation. Well-anchored inflation expectations (by which I mean that the public continues to expect low and stable inflation even if actual inflation temporarily deviates from its expected level) not only make price stability much easier to achieve in the long term but also increase the central bank's ability to stabilize output and employment in the short run. Short-run stabilization of output and employment is more effective when inflation expectations are well anchored because the central bank need not worry that, for example, a policy easing will lead counterproductively to rising inflation and inflation expectations rather than to stronger real activity."

http://www.federalreserve.gov/boarddocs/speeches/2003/20030325/default.htm

 

©2003  South-Western.  All Rights Reserved   webmaster  |   DISCLAIMER