The Scope of the Problem

I find observations like this:

Friday’s government jobs report added to the gloom and the sense that the recovery is losing steam. The Labor Department said private employers added about 83,000 jobs last month, considerably fewer than the 112,000 analysts had forecast.

That signals that could be years — not months — before the employment rate returns to pre-recession levels.

“We’re adding jobs but at an excruciatingly slow pace,” said labor market economist Heidi Shierholz of the Economic Policy Institute, a think tank. “Double dip or no, this is going to be an enormously long slog.”

very irritating. Now in fairness that’s just a small snippet from a substantial column. But it completely misstates the scope of the problem. Based on what used to be called the “natural increase”, the regular, normal increase in the population we need to add between 100,000 and 150,000 jobs every month just to maintain the current employment level as a proportion of the population. Or, said another way, unless the employment level drops to levels we haven’t seen in 35 years, the unemployment level can only rise. An increase of 41,000 or 83,000 jobs is better than nothing but at that rate we will never bring the people who’ve lost their jobs over the last couple of years back to work.

I think that practically everybody has it wrong, whether it’s Paul Krugman or President Obama counseling us to spend more or Angela Merkel and the German Parliament counseling us in the direction of austerity. Doing a little more or doing a little less won’t change the trends that have been underway for more than twenty years. We’ve been misallocating resources at a furious pace and we’re seeing the effects of that now.

Further misallocation whether through subsidizing inefficient businesses and government structures to keep them afloat or taxing the winners so that you can keep bailing out the losers in the great game of policy roulette (taxing the losers gets you nowhere—they have nothing to tax) merely perpetuates our problems rather than solving them. We need to do things differently. We need to be smarter.

It’s the structures that are fault—Big Government, Big Business, Big Labor. None of them are accomplishing the things that most need doing.

1 comment… add one
  • steve Link

    “It’s the structures that are fault—Big Government, Big Business, Big Labor. ”

    Yes.

    Steve

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