Washington Post: The Unemployment Rate is Too Low

Yes, that is what the Post had to say about yesterday's drop in the unemployment rate. The Post article asserted that: "considering that some workers lack the education and skills to be readily employable, economists regard any unemployment rate below 5 percent as striking." It then quoted Mark Zandi (generally a reasonable economist) as saying that "we are beyond full employment." Let's imagine that economics was a discipline where evidence mattered. In the 90s, the unemployment rate first fell below 5% in May of 1997 and didn't cross 5% again until October of 2001. During this four and a half year period, there was only a modest uptick in the inflation rate, much of which was attributable to a sharp rise in oil prices in 1999-2000. Back in the 90s, the Post would tell the public that economists believed that the unemployment rate could not get below 6.0 percent without generating inflation. This was the consensus within the profession. The low unemployment of the 90s proved that the mainstream consensus within the economics profession was wrong. But, rather than expand its array of sources to include economists who were not wrong about this issue, the Post simply goes back to the same folks who now use the same disproven economic theory with 5% as the magic number instead of 6%. What was that line about workers lacking the skill and education to be employable?

-- Dean Baker