I was poking around on Fred for something to write about when I put the unemployment level together with real GDP to see if there was anything significant there to look at. I found that unemployment was at what looks to be historical lows in numbers of persons from the period of ~1993-2008 compared to real GDP. At no other time since records were kept on the unemployment level has this pattern has been as low or sustained as during this period.
It could mean a lot of things, and I will have to leave it to experts to figure out the real significance of it. But from a philosophical perspective I notice some points that could bolster the free market and economic freedom approach to economics, which includes neutral monetary policy or the benefits of making up for undershooting at the very least.
One point that is not lost on me is that this graph includes the latter portion of the Bretton-Woods period, shows the impact of the learning curve in figuring out how to manage floating exchange currency, and the period of stabilization after the Fed figured it out. The dramatic difference in the unemployment level for the Bretton-Woods period and the Great Moderation are striking and should be part of the argument against resumption if we are interested in having an opportunity and self-sufficiency society.
Additionally, in this data, I see quite a challenge for the folks who are stuck on the idea of income inequality rather than the larger picture of the benefits of raising all boats. Having something is better than having nothing, and we can see that there were far more people getting something on their own while adding to national prosperity during the Great Moderation than at any other time since records have been kept on the unemployment situation. It doesn’t seem worth the gamble to try to level everyone out considering the differences between what is done with income in excess of basic living expenses across income categories. I also diverge from marginal utilitarians on this point because every dollar that is shifted away from investment into consumption does not necessarily improve overall happiness, but rather detracts from prosperity and the personal freedom to choose which investments are best on an individual basis. Of course there are some items on which we can agree, like education and safety nets, but I would prefer to have reforms in these that decentralize control of them; the more local control the better and I am also interested in the idea of public/private partnerships in the area of education.
PS: This graph also shows just how far Mr. Bernanke has to go toward meeting the employment mandate, about 6M people, give or take; and the number just keeps getting larger the longer he waits. Where’s the beef, Mr. Pollyanna?