It has been some time since I updated the graph of US unemployment against real interest rates. Data for the chart have been compiled from the Bureau of Labour Statistics website and our friends at the Fed.
Some interesting changes appear, assuming we can believe the data. As this graph suggests two metastable equilibria for unemployment rate given low interest rates--one low, the other high. It may be that we are beginning to leave the higher "attractor" by way of a rising real interest rate. Of course, it is easy to reduce the unemployment rate if you redefine unemployment.
The reason we appear to have a rising real interest rate is because of the rapid rate of decline in CPI as delineated in the BLS data. I don't know about you, but I haven't noticed prices falling. Of course this is Canada and not the US--also I pretty much only buy food, and tea. Creating the appearance of falling prices might help sell more of those negative interest rate bonds. Sell enough of those and your budget is balanced!
Some interesting changes appear, assuming we can believe the data. As this graph suggests two metastable equilibria for unemployment rate given low interest rates--one low, the other high. It may be that we are beginning to leave the higher "attractor" by way of a rising real interest rate. Of course, it is easy to reduce the unemployment rate if you redefine unemployment.
The reason we appear to have a rising real interest rate is because of the rapid rate of decline in CPI as delineated in the BLS data. I don't know about you, but I haven't noticed prices falling. Of course this is Canada and not the US--also I pretty much only buy food, and tea. Creating the appearance of falling prices might help sell more of those negative interest rate bonds. Sell enough of those and your budget is balanced!
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