IV. Employment, Unemployment, and the Labor Market
Both articles in this section of the North Carolina Economic Survey
1999 employ variants of the short-run Phillips curve. The first article
forecasts U.S. unemployment for 1999 and 2000. The second article forecasts
inflation based on changes in the labor market for the same period.
Mertz and Wells predict a 4.4 to 4.2 percent unemployment rate for
1999 and 2000. Their forecast is based on a hybrid approach including the
short-run Phillips curve, the Keynesian aggregate expenditures function,
and a new-classical production function.
Smathers uses an inverted short-run Phillips curve to predict inflation
based on lagged unemployment. She forecasts 2.2 percent inflation through
1999 and 1.9 percent through 2000.
The two forecasts presented in this section are both highly plausible
and consistent with the recent experience of low inflation and unemployment
throughout the 1990s. Hopefully these highly favorable conditions will
persist for some time.