Yesterday I pointed out the dog in the manger on the BLS’s most recent jobs report: that at the present rate it would take an unconscionably long time to bring unemployment to where it was when the recession began and even when it does an enormous amount of harm will have been done. On the NPR blog Jacob Goldstein has produced a graph, reproduced above, comparing employment growth following the late recession with other post-war recessions that may differ somewhat from the one you may be familiar with and which Bill McBride of Calculated Risk regularly updates.
As you can see, employment is recovering far too slowly, virtually the definition of an “L-shaped recession”. To their credit some of the Left Blogosphere blogs have latched on to this graph. Daily Kos front page regular Meteor Blades, whose work I’ve frequently liked, remarks:
A lot of people lost their homes. Spent all their savings. Exhausted their unemployment benefits. Graduated and couldn’t find a job right away—a delay that analysts say will have an negative impact on their wages from now until they retire. Took a job exactly like the one they were laid off from but that pays less and provides fewer benefits than before. Retired early because they couldn’t find a job and needed that Social Security check to survive, which as a result will now be smaller for the rest of their lives than it would have been had they been able to wait until full benefits kicked in.
Twelve million Americans are officially unemployed. Eight million are working part-time jobs not out of preference, but because they can’t get the full-time jobs they need. Another 6.8 million are no longer in the labor force but say they want a job. All told, 26.8 million Americans either unemployed or underemployed.
Even if the same 236,000 new jobs were created each month from now on, it would take (depending on how you count) from today until somewhere between October 2017 and July 2019 to recover where we would have been if the recession had not occurred.
very much echoing what I wrote yesterday.
Some, like David Adkins at Hullabaloo attribute the shortfall in jobs to weak aggregate demand:
Why is this happening? Well, we know it’s not because the rich “job creators” don’t have enough money. We know it’s not because corporations don’t have high enough stock valuations, or because they don’t have enough profits. We know it’s not because labor has too much power in the marketplace.
The answer is pretty simple: it’s a matter of weak aggregate demand.
He goes on to quote Paul Krugman. As should be clear from my previous posts, I’m skeptical of that explanation. I think the essence of a “bubble economy” is a sudden, dramatic decline in production due to the sharp drop in prices of the bubble commodity. Productive capacity is measured in dollars, not houses, bushels of wheat, or iPads. Keynesian stimulus isn’t a strategy to boost productive capacity. It’s a strategy to boost “aggregate demand” to fill the gap between that demand and productive capacity. No excess production—no gap. We need to increase production and fiscal stimulus may or may not do that. It depends on how the money is spent and the ARRA may have made some people very rich but it didn’t do nearly enough to increase production because it was predicated on shaky premises.
Our problems didn’t start in 2013 or in 2009 or 2007 or even in 2001. They started long, long before than and are now structural in nature. It will take structural reform to correct them. Areas ripe for structural change include government and its handmaiden industries: healthcare, education, finance.
In the meantime I should remind you that the Forbes Index of the Cost of Living Extremely Well has been rising very sharply over the last decade, more than tripling relative to the CPI. If you’re wondering why all of the Fed’s efforts at pumping money into the system haven’t produced inflation, it’s because you don’t buy the stuff that’s being inflated.