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October 1978

Economic Growth and Unemployment: A Reappraisal of the Conventional View

by John A. Tatom

The unemployment experience of the 1970s stands in marked contrast to the possibilities for unemployment and growth which had been envisioned by most analysts and policymakers at the end of the 1960s. At that time, most observers agreed that output could not continue to grow as fast, or the unemployment rate remain as low, as in the late 1960s without an accelerating rate of inflation. Nonetheless, maintaining an unemployment rate of about 4 percent and achieving a 4 percent annual growth rate of the nation’s output of goods and services appeared to be a realistic expectation. Except during 1973, however, the unemployment rate has been markedly higher over the past eight years than during the prior decade.