Friday, December 11, 2009

Losing 11,000 jobs is nothing to cheer about!

Last week the Bureau Labor Statistics reported that the nation lost 11,000 jobs in November.

Most of the coverage was like the of the over the top Milwaukee Journal Sentinel headine which declared: "Optimism returns as unemployment rate dips to 10%."

Not so quick.

As Nobel Prize winning economist Paul Krugman points out:

I don’t think many people grasp just how much job creation we need to climb out of the hole we’re in. You can’t just look at the eight million jobs that America has lost since the recession began, because the nation needs to keep adding jobs — more than 100,000 a month — to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment.

...we need to add around 18 million jobs over the next five years, or 300,000 jobs a month. This puts last week’s employment report, which showed job losses of “only” 11,000 in November, in perspective. It was basically a terrible report, which was reported as good news only because we’ve been down so long that it looks like up to the financial press.

So if we’re going to have any real good news, someone has to take responsibility for creating a lot of additional jobs. And at this point, that someone almost has to be the Federal Reserve.

I don’t mean to absolve the Obama administration of all responsibility. Clearly, the administration proposed a stimulus package that was too small to begin with and was whittled down further by “centrists” in the Senate. And the measures President Obama proposed earlier this week, while they would create a significant number of additional jobs, fall far short of what the economy needs.

But while economic analysis says that we should have a large second stimulus, the political reality is that the president — faced with total obstruction from Republicans, while receiving only lukewarm support from some in his own party — probably can’t get enough votes in Congress to do more than tinker at the edges of the employment problem.

The Fed, however, can do more.

The entire column is linked.

1 comment:

Peter said...

Beyond the interaction of monetary and fiscal policy, there is a lot that can be done to manipulate aggregate demand to be properly shaped so as to self-reinforce any gains that come (which should have positive impacts upon affecting un- and under-employment).

We need to tighten labor markets. We need to improve and increase wages, re-yoking them to productivity. We need to improve take-home pay -- which can be done in a big way through expanded and universal social insurance (i.e. health insurance, pensions). We need to end leaky boat, unfair trade policy. We need to craft an industrial policy. We need sane tax policies -- and tax policy is not a zero-sum game (i.e. higher marginal rates plunged back in to the economy through redistributive spending improves overall aggregate demand; disincentivizing 'investment' in finance products or speculation put investment and savings back into 'real' production and wealth creation).

The myopia on the 'either-or' dynamic of monetary and fiscal policy -- though Krugman, DeLong, Baker, and hundreds of other heads-screwed-on-straight, grasping-reality-with-both-hands economists deserve credit for pointing out that a) in a zero-bound scenario, monetary policy doesn't get the job done and b) we lost our ability to manage fiscal policy properly by letting it atrophy over 30 years -- is not sufficient for the discourse on fixing and improving our economy. We need to look at non-monetary, non-fiscal policy as a way to strengthen the economy, from active labor market policies to taxation and expenditure distribution and beyond.

-Peter Rickman-