Why was there low unemployment in the 90s?

Bradford DeLong jbdelong at uclink.berkeley.edu
Fri Jun 28 20:14:00 PDT 2002



>Blade Blade wrote:
>
>>What caused the relatively low unemployment in the US
>>in the 90s?
>
>The Fed allowed it to happen - i.e., it stood aside and let the U
>rate fall as borrowed money and irrational exuberance drove the
>economy into a boom. It didn't worry about rising wages and
>inflation because the rest of the world was falling apart, so prices
>behaved themselves.
>
>Doug

Or, alternatively, that rapid aggregate productivity growth drove a wedge between the wage increases workers aspired to given low unemployment and the price increases firms needed to maintain and expand profits, and thus low unemployment was consistent with stable inflation...

Brad DeLong



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