Saturday, February 13, 2010

Serious Stuff, This Unemployment

Pretty much confirms my thought that this is really the worst of the recessions I've seen, (and my working-life-memory includes the '74/'75.)

Also note that the 2001 cycle was not as sharp, but was VERY long.

HT: PowerLine


Deekaman said...

Worse than we can imagine.

J. Strupp said...

The mother of all jobless recoveries.

This chart should tell you everything you need to know about the state of aggregate demand and the private sector's inability to return us to our natural rate of unemployment for years to come (if we continue our current policies).

The troubling thing is that this lackluster recovery, coupled with stagnant job growth was predicted by Keynesians a year ago. The administration failed to adapt to a much larger than expected collapse in output and unemployment and here's what we're left with today......high unemployment, a smaller than needed stimulus package and the threat from politicos of tightening the belt on spending. This has all the makings of 1937 re-visited. Prematurely adopting contractionary policies that put us right back into recession.

This is truly insanity.

Dad29 said...

Mike Gousha had Knetter (UW-Biz) on this AM's show. Knetter agrees with you, Struppster, that the size of Porkulus was not sufficient.

Too bad they didn't get into the cause(s) (named "bubble.") That's the real Third Rail (and indirectly what Ryan is talking about)--we were, as a country, living in LaLaLand since the LTCM collapse spurred Greenspan to jack up the $$ supply.

That led to dotcom, and then to housing--both unsustainable.

Knetter DID opine that unwinding the stimulus/credit facilities will be a REAL big problem in the near future.

As usual, you miss part of the picture. Business investment--and employee-hiring--will not happen in an environment which threatens to change every 6 months with new/different tax, healthcare, 'carbon' regs, etc.

And consumption ain't gonna happen until Citizens All decide that their debt/assets ratio is comfy again.

J. Strupp said...

As I've said numerous times before: Businesses will not hire until they have customers. Other uncertainties take a back seat until that happpens.

And yes, debt/asset ratio is a BIG problem right now. But what picture neoclassicals and Austrians continue to miss is what course of action should be taken in a liquidity trap. Stimulus and/or credit facilities WILL be difficult to unwind in the future but it's going to be a hell of a lot more difficult to unwind our long term debt obligations with 10% unemployment, stagnant GDP growth and, therefor, lackluster tax receipts for 10 years, ala Japan.

As for the "bubble" that caused this mess. We don't disagree with each other. Same goes for deficit spending in normal times. We should strive for fiscal responsibility. But these aren't normal times. All things change when we are up against the zero bound. This has been the argument of Keynesians since the very beginning of the crisis.