Professor Martha Olney
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Phillips Curve Review
Monetary Policy Reaction Function
MPRF: Graph, Equation, Algebra
Shifts and Slope of the MPRF
Hello, welcome back.
On Friday, the
unemployment report was released.
unemployment rate in October was 10.2%.
include discouraged workers and part-time workers
who want to work full-time, the unemployment rate
would be 17.5%.
When I look at Table B-1, which
shows us patterns of job creation and job loss, a
couple things jumped out at me.
There were a total
of 190,000 jobs lost, a disproportionate amount of
which was in the goods producing sector.
goods producing sector makes up only 14% of the
economy, but 68% of the jobs lost was from this
This includes construction and
manufacturing, particularly of durable goods. We
still had an increase in healthcare jobs on all
previous reports since Fall 2007.
While we had a loss of service industry jobs, there
was one hopeful sign.
We saw an increase in
employment in the temporary help services
This industry involves agencies who hire
workers as temporary assistants and employees to
work for other companies.
One example is Kelly
Before the recession began in December
2007, jobs were first lost in the temporary service
In a downturn, businesses first get
rid of contract employees to whom they have no
When upturn starts, the
first people to be hired are temp workers because
businesses want to be sure a recovery has taken
When there are signs of recovery, businesses
will bring in temporary workers and if the recovery
is truly taking hold, they move to hiring permanent
Temporary help services is a leading
indicator of economic recovery and this industry
showed an increase in employment of 34,000. This
increase is the largest increase in the employment
On the other hand, consumers are still pulling black
and there are still declines in employment in the
arts, recreation, entertainment, and retail industries.
So we have signs of recovery as well as indications
that consumers are still less willing to spend.
This is the highest unemployment rate since April
In 1983, unemployment was this high
because the Fed had increased interest rates to
around 17% and investment spending had basically
Now we’re in a position where nominal
interest rates are zero.
The path out of the 1983
recession was lower interest rates, but the path out