Month: April 2009

Unemployment Up to 11% in March

Today’s release shows that the standardised unemployment rate, which is based on the Live Register, rose to 11% in March from 10.4% in February.  Over the past three months, the unemployment rate has risen by 2.4%, compared with an increase of 1.4% over the previous three months.

In terms of projecting GDP for the year, these figures suggest to me that the current “consensus” figure of something like a 6 percent (average-over-average) decline for 2009 is highly optimistic.  It is hard to see this huge jump in unemployment as consistent with anything other than a substantial contraction in output in first quarter.  With output having fallen by around 7 percent on a Q4-over-Q4 basis last year (whether measured on a GDP or GNP basis) the cumulative loss in output from peak has perhaps already reached 10 percent as we speak.

Once you factor in the contractionary effect of the upcoming budget, it is hard to see the economy producing a quick turnaround after the first quarter.  Working through the various scenarios along the lines of my post from last week, it’s very hard to see an average-over-average growth rate better than -8% this year and very easy to imagine scenarios that are worse.

An aside on the term ‘macro’

A few years ago, when Ben Bernanke’s appointment was ushered through the US Senate with hardly a murmur, Michael Evans—author of a once widely-used textbook called Macroeconomic Activity—quipped, ‘Macroeconomics, unless it messes up, doesn’t matter very much any more’.  Macro is no longer passé, however, so TCD’s Antoin Murphy is lucky in the timing of his The Genesis of Macroeconomics (just out, Oxford University Press). 

 

As Antoin points out the term ‘macroeconomics’ was coined by Ragnar Frisch in 1933.  Frisch also invented ‘microeconomics’ and ‘econometrics’, as well as some other terms that never caught on.   But ‘macroeconomics’ was still unfamiliar enough in 1945 for an article in the American Economic Review  to use it with the ‘macro’ bit in inverted commas.  It might never have caught on but for the Great Depression and Keynes’s General Theory.  Ironically, though, Keynes himself does not seem to have keen on the term.  Who was the first Irish economist to use it?

 

If JSTOR is to be trusted, the first use of the term in an academic journal was by Jan Tinbergen in 1936 (in ‘Sur la determination statistique de la position de l’équilibre cyclique’, Review of the International Statistical Institute, 4(2) (1936): 173-188).  Tinbergen, by the way, shared the Nobel Prize with Frisch in 1969.  The term was slow to catch on: one JSTOR ‘hit’ before 1940, three in 1940-44, and forty-four in 1945-49.  The story thereafter, as reflected in JSTOR, is summarized in the accompanying table.   Will these ‘interesting times’ reverse the apparent downturn in usage?

 

Year          ‘Hits’
1935-9 1
1940-4 3
1945-9 44
1950-4 149
1955-9 217
1960-4 436
1965-9 959
1970-4 1639
1975-9 2806
1980-4 4429
1985-9 6385
1990-5 7368
1995-9 8028
2000-4 7186

 

 

 

 

 

What Should The Government Do?

Ciaran O’Hagan gives his opinion here.

Drawing on a contribution by Patrick Honohan on this blog, Vincent Browne gives his opinion here.