What made Summers' frank comment important is that it suggests this
just-add-gas relationship may now be malfunctioning. The American
economy has been shedding jobs much, much faster than Okun's law
predicts.
According to that rough rule, we should be at about 8.5%
unemployment today, not slipping toward 10%. Something new and possibly
strange seems to be happening in this recession. Something unpredicted
by the experts.
"I don't think," Summers told the Peterson Institute
crowd — deviating again from his text — "that anyone fully understands
this phenomenon." And that raises some worrying questions.
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