Saturday, February 19, 2011

Is It 1983 All Over Again?

I do not advocate expecting patterns to repeat in macroeconomic data. But, I’m open-minded about it.

Floyd Norris, in the February 4 issue of The New York Times notes how similar the unemployment situation is right now, to that at the start of the Reagan expansion.

The unemployment rate declined four-tenths of a percentage point in one month. There had not been a monthly decline that large in many years, but economists were unimpressed. After all, the decline was caused in no small part by a surprising reduction in the labor force, which could be an indication that more workers were discouraged and no longer looking. That would hardly be an encouraging development.

Anyway, it was said, the unemployment rate is based on a survey of only 60,000 households, some of whom cannot be reached in any given month. It can be volatile, so you should not pay much attention to it. The president took heart from the figures, but critics said there was no real improvement.

The above describes what happened a month ago …

… Those paragraphs also describe the situation 28 years ago. In January 1983, with President Ronald Reagan reeling from his large setback in the midterm elections the previous November …

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