Monday, October 08, 2012

since the end of world war II, the economy has not been faced with such a large employment slack

seekingalpha | the USA economy is screwed up because 8% of the pre-recession workforce has been vaporized (the red line on the above graph is currently at 92% of the pre-recession peak).

If one is on social security, in some other social safety net, employed, or the 0.001% - the new normal may not be that bad. You may pity the jobless, but you may be missing the reality that 8% loss of jobs caused the economy to lose 8% of its prime driver - Joe "the consumer" Sixpack. With over 2/3rds of the economy consumer driven, the solution is obvious - create 24 million jobs.

Since the end of World War II, the economy has not been faced with such a large employment slack.

Fed Chairman Ben Bernanke sees this as the economic headwind which is causing terrible growth, and the stated reason for QE3. This author doubts that quantitative easing on top of a zero interest rate policy can have any effect on employment. It seems like a "hail Mary" play stemming from a lack of fiscal policy stimulus from Congress - and even a Hail Mary pass with no receivers downfield, if you will.

Any solution to stimulate employment is in fiscal policy and regulation - and possibly a revisit to policy utilized post WWII to create jobs for the returning soldiers.

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