- Links for 2012-05-09
- Krugman: How Bad Things Are
- Fed Watch: Greece, Again
- "The Unemployment Rate Without Government Cuts: 7.1 Percent"
Posted: 09 May 2012 12:06 AM PDT
Posted: 08 May 2012 05:03 PM PDT
This is from chapter 1 of Paul Krugman's new book "End This Depression Now" (the full chapter 1 is here):
...How severe is the problem of unemployment? That question calls for a bit of discussion.
Clearly, what we're interested in is involuntary unemployment. People who aren't working because they have chosen not to work, or at least not to work in the market economy--retirees who are glad to be retired, or those who have decided to be full-time housewives or househusbands--don't count. Neither do the disabled, whose inability to work is unfortunate, but not driven by economic issues.
Now, there have always been people claiming that there's no such thing as involuntary unemployment, that anyone can find a job if he or she is really willing to work and isn't too finicky about wages or working conditions. There's Sharron Angle, the Republican candidate for the Senate, who declared in 2010 that the unemployed were "spoiled," choosing to live off unemployment benefits instead of taking jobs. There are the people at the Chicago Board of Trade who, in October 2011, mocked anti-inequality demonstrators by showering them with copies of McDonald's job application forms. And there are economists like the University of Chicago's Casey Mulligan, who has written multiple articles for the New York Times website insisting that the sharp drop in employment after the 2008 financial crisis reflected not a lack of employment opportunities but diminished willingness to work.
The classic answer to such people comes from a passage near the beginning of the novel The Treasure of the Sierra Madre (best known for the 1948 film adaptation starring Humphrey Bogart and Walter Huston): "Anyone who is willing to work and is serious about it will certainly find a job. Only you must not go to the man who tells you this, for he has no job to offer and doesn't know anyone who knows of a vacancy. This is exactly the reason why he gives you such generous advice, out of brotherly love, and to demonstrate how little he knows the world."
Quite. Also, about those McDonald's applications: in April 2011, as it happens, McDonald's did announce 50,000 new job openings. Roughly a million people applied.
If you have any familiarity with the world, in short, you know that involuntary unemployment is very real. And it's currently a very big deal...: for millions, the damage from the bad economy runs very deep. ...And we aren't doing nearly enough to try to fix the unemployment problem, in part because of those who say unemployment is the fault of the unemployed -- they aren't trying hard enough, they're lazy, they're addicted to the benefits, and other such nonsense. They tell us that it's all structural and hence there's little we can do, that we can afford wars and tax cuts, but not this. In short, what we hear is any excuse Republicans can think of to forestall government action. And they're winning the ideological battle. Government is shrinking -- the Republicans are making good on the adage to "never let a crisis go to waste" -- all the while accusing Democrats of out of control spending and stoking fears of impending budget doom in the hopes of getting even more reductions in the size of government. Under those circumstances, we aren't going to get much help for the unemployed, especially if Democrats continue to roll over rather than making a strong, winning case for an alternative path.
Posted: 08 May 2012 01:42 PM PDT
Greece, Again, by Tim Duy: It is shaping up to be another long, hot summer, and not just because of global warning. As has been widely noted, the austerity backlash in Europe began in earnest this past weekend. And Greece is once again the epicenter, at least for now. The Greek political system appears rudderless, which is calling into question the nation's resolve to complete the conditions of the last bailout package. Moreover, there are open calls for Greece to renege on the deal:
Posted: 08 May 2012 08:01 AM PDT
Via the WSJ's Real Time Economics, a calculation of how costly the "sharp cuts in state and local government spending" have been:
Unemployment Rate Without Government Cuts: 7.1%, by Justin Lahart: One reason the unemployment rate may have remained persistently high: The sharp cuts in state and local government spending in the wake of the 2008 financial crisis, and the layoffs those cuts wrought.
The Labor Department's establishment survey of employers — the jobs count that it bases its payroll figures on — shows that the government has been steadily shedding workers since the crisis struck, with 586,000 fewer jobs than in December 2008. ... But the survey of households that the unemployment rate is based on suggests the government job cuts have been much, much worse.
In April the household survey showed that that there were 442,000 fewer people working in government than in March. The household survey has a much smaller sample size than the establishment survey, and so is prone to volatility, but the magnitude of the drop is striking: It marks the largest decline on both an absolute and a percentage basis on record going back to 1948. Moreover, the household survey has consistently showed bigger drops in government employment than the establishment survey has.
The unemployment rate would be far lower if it hadn't been for those cuts: If there were as many people working in government as there were in December 2008, the unemployment rate in April would have been 7.1%, not 8.1%.
Ceteris is rarely paribus, of course: If there were more government jobs now, for example, it's likely that not as many people would have left the labor force, and so the actual unemployment rate would be north of 7.1%. ...It's possible to quarrel with the exact figure given above, but not the general message. One of the biggest policy mistakes that has been made during this recession is allowing government employment to fall by this magnitude. Stabilization policy calls for the opposite, a temporary increase in employment to provide employment for people who cannot find private sector jobs, and at the very least we should have kept government employment stable.
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