Friday, January 09, 2009
How do we digest the news that the unemployment rate has jumped above 7% for the first time in 15 years? Well, it's very sad to see so many people losing their jobs. We should note, however, that unemployment rates above 7.0% are not unheard of in our lifetimes. In the thirteen year period between 1974 and 1986, the unemployment rate rose to 7.0% or higher at one point or another in 11 of the 13 years. Imagine that! When I was in college in the late 1980s, economists used to contend that the natural rate of unemployment was roughly 6%. However, we've all become quite accustomed to the very low unemployment rates of the past 15 years; thus, it's very disconcerting to see the job losses that people are experiencing throughout the United States. Many people cannot recall this type of unemployment, though it's actually not that long ago when our economy experienced similar levels of unemployment.