Vocabulary

to expand the money supply – увеличить объем денежной массы в обращении monetary expansion – увеличение денежной массы в обращении

tradeoff – компромисс; здесь: взаимозависимость

the Phillips curve – кривая Филлипса

to challenge (the concept) – поставить под сомнение (идею)

to peg – привязывать; здесь: определить уровень; pegging – привязка цены или курса валюты к определенному ценовому ориентиру, индексу, валюте или корзине валют

bond – облигация; interest on the bond – проценты, выплачиваемые по облигации

inflation hawks – члены ФРС, стремящиеся не допустить высокий уровень инфляции и требующие проведения мер по борьбе с ней ( путем повышения процентных ставок)

Exercises

1. Find in the text synonyms to the following:

to get rid of, to dismiss, to suspend from employment during a slack period, redundancy, an enlargement, a collection of numerical data, to make an exchange of one thing for another, ten years, to call into question, to increase the speed of, medium, a certificate of debt issued by the government.

2. Find the equivalents in the text:

уровень безработицы нельзя свести к нулю, относительно быстро найти работу, признавать обоснованность термина, с этим нельзя переборщить, сильно отличаться от уровня в 6%, обнаружилась та же взаимная зависимость, из чего складывается полная занятость; дело дошло до того, что был принят закон, по подсчетам экономистов, он оспорил саму идею.

3. Make up 5 sentences with the phrase “granting that”.

4. Translate the following paying attention to the underlined words:

   1. While on a holiday, my wife wouldn’t let me take any work with me.

   2. He would play crib (карточная игра) with zest and would allow no argument.

   3. And, as the late Tommy Cooper would say, that’s not all.

   4. I would go across the road to Mr. and Mrs. Hall’s on a Saturday night and would watch Benny Hill one week and Dave King the next.

   5. All existing records would be broken, and profits would flood in as the skiing rich flocked to resorts.

   6. Some would suffer from the cold, others from the heat, and still others would become badly hurt.

   7. Grandma would use a flower for her buttonhole when she went to church.

5. Do exercise 8 on page 61, and exercise 15 on page 67 in the Krasnov file.

By James C.Cooper

Low Unemployment Raises an Old Inflation Debate

Should the Fed keep hiking rates in the face of a tighter labor market?

Remember NAIRU? Sounds just like “Nehru,” but it’s not one of those collarless jackets popular in the 1960s. NAIRU is the acronym for Non-Accelerating Inflation Rate of Unemployment, the clunkiest phrase economists ever devised. It was last heard amid the inflation debate in the late ‘90s. In plain English, NAIRU is the lowest the unemployment rate can go without generating a sustained pickup in inflation. On the heels of the strong January employment data, the debate now begins anew: When should policymakers and investors start to worry about the inflation implications of tight labor markets?

Vigorous job growth, including 687,000 new payroll slots in just the past three months, pushed the jobless rate down to a 41/2-year low of 4.7% last month. Hourly pay of production workers, up 3.3% from a year ago, is rising at the fastest pace in nearly three years. And job growth is generating plenty of income to support consumer spending, which is a key reason for the economy’s forward thrust in early 2006. This momentum will only tighten the labor markets further.

At the end of last year, the Federal Reserve first voiced its concern that “possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures. “ That’s Fedspeak for “if the labor markets get too tight, we might take the policy past the neutral zone into an area that actually restricts economic activity.” Back then, the unemployment rate was 5%, job growth was hobbled by the hurricanes, and the economy appeared to be slowing down. Now the landscape is starting to look less inflation-friendly.

As was clear in the late ‘90s, the importance of NAIRU is more theoretical than practical, because the rate is a moving target, shifting from business cycle to business cycle with the changing structure of the economy. Recall that, by 2000, the jobless rate had dipped a tick below 4% with little evidence that inflation pressures were building in any big way.

However, 2006 may well be different from the late 1990s, because the unemployment rate may not have as much room to fall as it did back then. Inflation in the late ‘90s was restrained by several forces. Fed policy was already in the restrictive zone, based on the Fed’s inflation-adjusted policy, even before the Fed began to tighten in 1999. A global production capacity glut following the Asian crisis in 1997 sent deflationary waves rippling through the world economy. The dollar was soaring, holding down import prices. And productivity growth was accelerating as new technology blossomed.

In 2006, Fed policy is only neutral, and it has been exceptionally loose for four years. Global competition still is clealy anti-inflationary, but domestic demand in global economies is either strong, as in China and the rest of Asia, or improving, as in Japan and the euro zone. The broad trade-weighted dollar has fallen 15% from its peak in early 2002, with further declines likely this year. And importantly, productivity growth is now slowing. In recent years companies have been exceptionally hesitant to invest and hire amid the uncertainties of corporate scandals, war, and energy shock. Businesses have satisfied demand with their existing facilities and payrolls. That reluctance temporarily boosted productivity.

But corporations have taken their shiort-term efficiency gain about as far as they can. With demand still strong, the recent robust job gains suggest that companies are ready to rely more on additional workers and less on greater productivity to meet their growth in production. That pattern doesn’t rebut the improved long-term outlook for productivity growth, but in the short term, it is a typical trend as an economic expansion matures. It just took a little longer for it to show up this time.

The inflation concern is that productivity is slowing at a time when wage growth is picking up. That’s a recipe for faster increases in unit labor costs, which correlate with inflation outside of energy and food.

The other side of stronger job markets is the support they are providing consumer confidence and spending. Little wonder why January consumer confidence hit a 31/2-year high: over the past year, monthly job growth has averaged about 175,000 slots per month. As a result, the unemployment rate has declined by half a percentage point. If job growth continues at that rate, and the extremely low level of new unemployment claims heading into February suggests that it will, then the jobless rate could be below 4.5% by summer.

So, while the key NAIRU level remains fuzzy, what’s clear is that the economy moved a lot nearer to it in January than anyone expected it to jnly a few months ago, and that marker will get even closer in the coming months.

Business Week, 2006

Notes

1. that’s a Fedspeak for – что на языке ФРС означает…

2. inflation outside of energy and food = “core inflation”, т.е. “базовая инфляция”: изменение цен за вычетом сезонных колебаний цен на продовольствие и энергоносители