Thursday, August 29, 2013

How low is low?

Economists have been debating what 'full employment' means for a long time.  The only answer is that there is not a clear answer either quantitatively, or possibly even conceptually.

So I note my friend Mark's comment in one of the stories on the latest labor force data. PG: Pittsburgh Area unemployment rate declined slightly in July.  He is quoted in part: "With a healthy unemployment rate for the region being in the range of 4.5 percent." I am certain he said a lot more in context to explain that, but the blurb that made it to ink is worth thinking about.  What is a low unemployment rate for Pittsburgh.  Is 4.5% some standard?   Below is a histogram of the monthly unemployment rate for Pittsburgh every month since January 1970.  The regional unemployment rate has been below 4.5% for all of 33 out of 532 months over that period.  So 6.7% of the time.  Just saying.....  if that is the standard, when we reach it we will be in rarified times for Pittsburgh.  


Anonymous BrianTH said...

I can believe the local labor markets have been more unhealthy than healthy during that period. But there is (probably) a too-low unemployment rate, and something more like 5-5.5 seems like a safer bet than 4.5.

Thursday, August 29, 2013 8:19:00 PM  

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