Bad Projections: the Federal Reserve, the IMF and Unemployment

Dean Baker

Those of us pushing the Federal Reserve Board to hold off on raising interest rates have pointed out that the members of the Fed’s Open Market Committee, like other economists, have repeatedly over-estimated the non-accelerating inflation rate of unemployment (NAIRU), the unemployment rate at which inflation would start spiraling upward. In 2014, they had put it at 5.4 percent. Today the unemployment rate stands at 4.1 percent, with no evidence of acceleration in the inflation rate.

If the Fed’s inflation hawks had their way, there would have been sharper increases in interest rates over the last four years. These would have slowed growth and prevented millions of workers from getting jobs and tens of millions from getting pay hikes. For this reason, we have argued for caution in raising rates until there is clear evidence that inflation is becoming a problem.

It turns out that the United States is not the only place where economists have trouble projecting floors to the unemployment rate. The figure below shows the IMF’s projection of unemployment rates from April of 2014 for the calendar year 2018. It also shows the most recent measure from the OECD.

Source: IMF and OECD.

In the vast majority of cases, the most recent month’s unemployment measure is well below the 2014 projection. For example, Belgium would have an unemployment rate of 8.3 percent in 2018. The most recent month’s data put the unemployment rate at 5.2 percent. For Germany, the projection was 5.2 percent unemployment; the most recent number was 3.5 percent. For the UK it projected 5.7 percent; the most recent number is 4.2 percent.

In some cases, the gaps are dramatic. The IMF projected an unemployment rate for of 5.5 percent for the Czech Republic; the actual rate is 2.4 percent. For the Slovak Republic, the projection was 12.2 percent; the actual figure is 7.5 percent. In the case of Spain, the projection was 22.6 percent; the most recent figure is 16.1 percent. On the whole, the average projected rate was 8.0 percent, the average current rate is 6.6 percent.

There are six countries in which the actual rate is worse than the projected rate. The actual rate in Finland is 0.9 percentage points higher than the 2014 projection. The rate in Italy is 1.2 percentage points higher. But, Greece is the big winner in this category. Its 20.8 percent unemployment rate is 4.5 percentage points higher than the 16.5 percent rate projected four years ago.

The moral of this story is that economists have a very bad track record in projecting unemployment rates. If a central bank wants to raise interest rates to head off inflation, it would be well-advised to look at what is happening to prices rather than relying on projections of NAIRUs. (The 2014 projections can be seen as NAIRU projections since the IMF assumed that the cyclical component of unemployment would be largely gone by that point.)

Is Iran And Israel’s Shadow Conflict Coming Out In The open?

Priyale Chandra

Another conflict seems to be brewing in the Middle East, this time between Israel and Iran. Israeli Prime Minister Benjamin Netanyahu recently accused Iran of sending drones to attack Israel. Netanyahu’s statement comes after Iranian Foreign Minister Mohammad Javad Zarif denounced Israel for violating international law.

These statements come in the light of heightened tensions between the two countries. On April 9, Israel allegedly conducted airstrikes on Syria’s T-4 airbase, killing 14 people, including Iranian nationals. While Israel has not officially claimed responsibility for the attacks, Netanyahu along with his ministers, has stepped up the rhetoric against Iran, claiming they will not let Iran establish a military foothold in Syria.

As Syrian President Bashar al-Assad consolidates his rule in Syria with the help of Iranian forces, the conflict between Israel and Iran, which always seemed to be clandestine, is coming out in the open. There are several reasons for the change from shadow war to open conflict.

A sympathetic USA

The foremost reason is the change in the USA’s attitude towards Iran and the nuclear deal. Under the Trump administration, the US has become more hawkish about Iran. In fact, President Trump has regularly voiced his mistrust of Iran and his displeasure with the deal on public channels. The relations between Iran and US, which had improved post the nuclear deal, have worsened again.

Also, Trump’s clear and obvious preference for increasing ties with Israel at the cost of the Palestinian Authority has emboldened Israel’s stand against Iran. While Israel and USA have always been allies, relations had cooled after the Obama administration’s agreement with Iran on its nuclear facilities.

Iran’s increasing influence in Syria

Another factor is Iran’s increasing influence in Syria. As Bashar al-Assad regains more of his territory from the Syrian rebels, Iran, with whose help he has remained in power, also becomes more influential in the region. This has rattled Israel. Another country that feels the same is Saudi Arabia. Saudi Arabia, which had supported the rebels in Syria, is involved in its own power struggle with Iran for supremacy in the Middle East.

Sensing a new government in the USA that is hostile to Iran and partial to their own interests, Israel and Saudi Arabia have banded together. The cutting off of diplomatic ties with Qatar, Prince Salman’s recent statements on the Jewish people having a right to their own land- all of this is plain evidence of closer ties between the countries to counter Iran.

The present increase in the conflict

Israel has conducted airstrikes previously in Syria, targeting convoys of Syrian troops and the Hezbollah. It sees the growing clout of Iran as a threat to its borders. The Israeli air force confirmed last year that it had conducted almost 100 airstrikes on these targets since the Syrian conflict began.

But the incident on 9 April was unprecedented because airstrikes were launched on a Syrian airbase. This is also the first time that Iran itself, along with Russia, acknowledged the attack on its nationals and blamed Israel for it. Meanwhile, an Israeli officer confirmed to the New York Times that the airstrikes were conducted by Israel.

It also marks an increase in war-mongering rhetoric from both sides. Meanwhile, Russia has announced it is supplying advanced missile systems to Syria. It has warned that Israel could suffer “catastrophically” if it decided to attack the missile systems.

The idea of Russia getting involved in a conflict with Israel, or even an open confrontation between Iran and Israel, is frightening to say the least. The entire world can be dragged into this conflict, particularly given the USA and Russia’s support to opposing sides. While both Iran and Israel deny that the increased tension will spill over into a direct war, it is unclear till when this statement will ring true.

93 Years of Occupation And Ahwazi’s Suffering Continues

Faisal Fulad

Ahwaz Arabia, whose geography extends from the Shatt al-Arab to the Jagin River in Jask, East of Jamberon (Bandar Abbas), but, since the occupation of Ahwaz on April 20, 1925, the Iranian regime changed the official name of Al-Ahwaz to several provinces such as Khuzestan, Bushehr, Elam, and Hermozgan. The inhabitants of Ahwaz are all Arabs, not the Persians, as the Iranian authorities claim. The natural resources of Ahwaz are oil and gas, and its soil has a high potential for agriculture and Al-Ahwaz has three major rivers, such as Karoon, Jarahi, and Karkheh, which play a vital role in irrigating the arable land.

Al-Ahwaz in a 93-year history of the occupation is suffering from the worst crimes against humanity, which are against the international humanitarian law and the international human rights law – and the most important violations committed by the Iranian authorities in Ahwaz, which include “death penalty, displacement, enforced disappearances and arbitrary arrests, and building excessive dams to change the Ahwazi rivers towards Persian cities, as well as change the demographic of Ahwazi Arabs.

Ahwazi and International Human rights organisations said that despite the passage of 93 years of occupation of Iran to Al-Ahwaz. Iran controls all aspects of life in Ahwaz through oppression, discrimination and systematic violations of the rights of the population.

Iran was distinguished in at least six categories of serious violations of international human rights law and international humanitarian law in Ahwaz, such as indiscriminate executions without fair trials; forced displacement; arbitrary detention; severe torture and construction of dams to contaminate the land; settlements; as well as discriminatory policies that harm the Ahwazi Arab people.

Iranian forces and security forces killed more than 500 Ahwazi civilians in the previous and recent protests and uprisings (2005, 2011, 2017, and 2018) through shootings, executions, and killings under torture. Many of these crimes violate the international humanitarian law and international human rights law because they do not take all possible precautions to avoid violence. Some of which constitute war crimes, including the targeting of peaceful demonstrators and the killing of innocent people under torture on the charge of having dangerous for Iran national security.

Since 1989, the Iranian authorities have facilitated the transfer of settlers from Iranian areas to the Ahwazi cities with the aim of changing demographics, including the creating of the Ramin settlement, which has more than 250,000 settlers. Iran has built about 50 settlements for more than 1 million settlers in different parts of Ahwaz since 1979, so that some 200,000 settlers were moved to the city of Jamberon in less than 40 years. Iran applies Iranian civil law to settlers, but does not provide any rights to Ahwazi citizens despite the Ahwazi have an Iranian citizenship. Iran provides the settlers with the infrastructure, services, and support that deprive the Ahwazi of it, creating and strengthening a separate and unfair system of laws, rules, and services.

Iranian authorities have imprisoned 36,000 Ahwazi since 2005, most of them after trials in revolutionary courts, with a conviction rate of nearly 85 percent. In addition, hundreds of people are subject to administrative detention each year on the basis of secret evidence without charge or trial. Some were detained or imprisoned for their involvement in cultural and civic activities. Iran also jails children under the age of 18, creating a violation of international law. Many detainees, including children, face harsh conditions and ill-treatment.

Therefore, the international community, the League of Arab States and the Gulf Cooperation Council have been called upon to act immediately to end the occupation and to end the arbitrary policy against Ahwazi citizens who have suffered persecution since 1925, especially since the coming of the current regime in 1979. For example, the regime killed more than 500 Ahwazi at the beginning of the revolution in 1979 and this is the beginning to suppress peaceful demonstrators in Ahwaz.