Re: [OPE] The rising NAIRU

From: Paul Bullock <>
Date: Fri Jul 03 2009 - 17:07:23 EDT

The 'natural' rate of unemployment, inflation, wages, and any combination
of the same etc are all unadulterated nonsenses and anyone who even engages
with this sort of stuff is obviously 'naturally' lost.

----- Original Message -----
From: "Jurriaan Bendien" <>
To: "Outline on Political Economy mailing list" <>
Sent: Friday, July 03, 2009 7:44 AM
Subject: [OPE] The rising NAIRU

> American jobs data are worse than we think
> By Mohamed El-Erian
> Published: July 2 2009
> (...) The US faces a material probability of both a higher Nairu (in the 7
> per cent range) and, relative to recent history, a much slower convergence
> of the actual unemployment rate to this new level. This paradigm shift
> will complicate an already complex challenge facing policymakers. They
> will have to recalibrate fiscal and monetary stimulus to recognise the
> fact that "temporary and targeted" stimulus will be less potent than
> anticipated. But the inclination to increase the dose of stimulus will be
> tempered by the fact that, as the fiscal picture deteriorates rapidly, the
> economy is less able to rely on future growth to counter the risk of a
> debt trap. (...)
> You can compare this to what I wrote in the context of the Abba Lerner
> symposium in RRPE, in 2006:
> "If the observed number of long-term unemployed rises, despite low
> inflation, the "natural rate of unemployment" must also increase. All one
> can then conclude is that it nowadays takes more unemployed people to keep
> prices stable. Thus, the NAIRU provides the perfect justification of a
> permanent "reserve army of labor" as necessary and inevitable."
> Jurriaan
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