Wednesday, July 6, 2011

How Long Until Employment Recovers?

Colin Barr awhile back had an article where he discussed the discouraging outlook for the U.S. labor market.  It got me wondering how long it would take employment to return to the level where the number of jobs created each month had kept up all along with the population growth rate.  Conventional wisdom says that the U.S. economy needs to create 125,000 jobs per month to keep up with population growth.   Growing jobs at this rate each month since the start of the recession and assuming the economy starts generating 200K, 300K, and 400K jobs per month produced the following chart: (Click to enlarge)


Sigh.  And to think most of this could have been avoided with more aggressive but systematic monetary policy.  

7 comments:

  1. David And the EPI has the gall to say "this is not an unusual recovery".
    http://www.epi.org/publications/entry/historically_deep_job_loss_but_not_an_unusual_recovery/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+epi+Economic+Policy+Institute#When:13:51:27Z

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  2. That chart has an ostensibly 'normal' line projecting forward from 2006-2007 as if those years represented a sustainable baseline. But they don't. 2007 was the peak of the mortgage bubble.

    Go back a couple decades, and draw a line forward that runs between the peaks and troughs of the booms and busts.

    And then present your charge with a Y-axis that goes all the way to zero. When you focus the chart on the top 25%, you basically exaggerate the problem four-fold.

    Is the un-embellished truth just not exiting enough to blog about?

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  3. To Anonymous: the farther back one goes, the worse the problem appears. Prof Beckwith makes a good (if oversimplified) point. It is worse when one considers the industries where jobs have been lost (and gained) since 2007 and prospects for seeing a change there.

    Re: your y-axis complaint. Do you believe we have a healthy economy (and a reasonable chance of fixing the budget problem) if only 90 percent of the workers who want jobs can get them? Using your "include zero on the y-axis" approach is akin to saying "stand far enough away from any problem and you won't be able to see it."

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  4. To Anonymous: the farther back one goes, the worse the problem appears. Prof Beckwith makes a good (if oversimplified) point. It is worse when one considers the industries where jobs have been lost (and gained) since 2007 and prospects for seeing a change there.

    Re: your y-axis complaint. Do you believe we have a healthy economy (and a reasonable chance of fixing the budget problem) if only 90 percent of the workers who want jobs can get them? Using your "include zero on the y-axis" approach is akin to saying "stand far enough away from any problem and you won't be able to see it."

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  5. Indeed strong and effective economic decisions has to be taken to counter the unemployment rate.

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  6. And to think most of this could have been avoided with more aggressive but systematic monetary policy.

    *Sigh*, Monetarists (and Keynesians) are like two peas in a pod.

    When record high money printing (stimulus) leads to a worse economy, the problem was that there was not enough money printing (stimulus).

    An inflation financed boom cannot keep going by more inflation. Inflation distorts the real capital structure of the economy. That structure can only be fixed by abstaining from further inflation, not by more inflation.

    If the Fed printed $100 trillion, and the economy become even worse, then you'd say before they print it, that they should print $200 trillion. That way, when the economy gets worse, you can say "AHA! It's because they did not print $200 trillion!" and when the economy goes onto another unsustainable boom that manifests itself in higher statistics in your armchair model, then you will say "See? Monetarism works! It worked better than I expected!"

    For the sake of the economy, for the sake of people's real lives, you monetarists should get your heads examined.

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  7. "And to think most of this could have been avoided with more aggressive but systematic monetary policy. "
    -----------------------------------------

    Excellent point, and I wholeheartedly agree, especially with the "systematic" part. As in having specific goals and not doing things willy nilly. Not printing 100's of trillions of dollars in some sort of vague "make the economy better" non-specific goal.. A 5% growth path for NGDP sounds like an excellent goal for monetary policy.

    Once that goal is reached, then the "monetary authority" has done its job and any other problems that remain are not its problem.

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