For example, Bill wrote a Federal Reserve staff paper titled "Rules-of-Thumb for Guiding Monetary Policy" (Poole, 1971).  Because his econometric analysis of the available data indicated that money demand was more stable than aggregate demand, Bill formulated a simple rule that adjusted the money growth rate in response to the observed unemployment rate.  Bill was also practical in noting the pitfalls of mechanical adherence to any particular policy rule; in this study, for example, he emphasized that the proposed rule was not intended "to be followed to the last decimal place or as one that is good for all time [but] . . . as a guide--or as a benchmark--against which current policy may be judged" (p. 152).

Using a standard rule of thumb, the unemployment rate should have been essentially unchanged, given the 3 percent growth rate the economy has averaged over the past four quarters.

A rough estimate puts the reduction in real GDP growth from the increases in energy prices since late 2003 at between 1/2 percent and 1 percent per year.

The surge in energy prices since late 2003 has significantly reduced the purchasing power of households and decreased the profits of non-energy firms, thereby restraining both consumer spending and business investment. By rough estimate, these increases in energy prices have probably reduced real GDP growth between 1/2% and 1% per year over this period. Although some of this loss in output will be made up in the longer run as the U.S. economy adjusts to higher energy prices, the level of productivity is likely to remain lower than it otherwise would have been, as firms use less energy per worker.

Academic research has shown that estimates of NAIRU are very imprecise and are subject to significant standard deviations…My own research department estimated that the NAIRU was between 3.4 and 5.9 percent between 1983 and 2004 with a 95 percent confidence level. This is a fairly wide band of uncertainty. The problem is that estimates with this level of imprecision are of limited use when conducting monetary policy. When policymakers are attempting to evaluate whether there is still slack in the labor market, or if any further decrease in unemployment may lead to inflationary pressures, it clearly would be preferable to have more precise estimates of NAIRU.