Joe Gagnon on *25 Years of Excess Unemployment* and the Phillips Curve Debate
Macro Musings with David Beckworth
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The Phillips Curve Isn't Perfect
As the workforce got younger from the 1950s to 1980, the natural rate of unemployment rose because young people are more likely to be unemployed. That's partly why we got into the inflationary periods because as a natural rate of Unemployment was rising, but the macro policy makers didn't realize that they were trying to hit the target of unemployment too low. It peaked around 1980 and then it's been falling ever since and that's been pulling it back down. And again, if you look at the Fed's forecast and analysis, I don't think they fully saw that process. Also the other demographic changes, longevity and birth rates and stuff were lowering our star because it was changing the mix of saving
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