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BPEA Article

Unemployment and Output in 1974


IN THE SECOND QUARTER of 1974, real gross national product stood 2.2 percent below its peak rate of the fourth quarter of 1973, reflecting one of the sharpest two-quarter declines in the postwar period. Yet, between these two quarters, the unemployment rate rose only 0.4 percentage point, from 4.7 to 5.1 percent, an unusually small rise against the background of historical experience and analytical expectations. In the third quarter, the rate moved up further, to 5.5 percent; but it still displayed puzzling sluggishness since, according to preliminary estimates, real GNP fell further in that quarter. This paper will focus on the behavior of unemployment in relation to output between 1973:4 and 1974:2.


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