Volcker's Great Recession Redefines Full Employment as Jobs Vanish Forever

[marmar]

‘Great Recession’ Will Redefine Full Employment as Jobs Vanish
By Matthew Benjamin and Rich Miller


May 4 (Bloomberg) -- Post-recession America may be saddled with high unemployment even after good times finally return.

Hundreds of thousands of jobs have vanished forever in industries such as auto manufacturing and financial services. Millions of people who were fired or laid off will find it harder to get hired again and for years may have to accept lower earnings than they enjoyed before the slump.

This restructuring -- in what former Federal Reserve Chairman Paul Volcker calls “the Great Recession” -- is causing some economists to reconsider what might be the “natural” rate of unemployment: a level that neither accelerates nor decelerates inflation. This state of equilibrium is often described as “full” employment.

Fallout from the recession implies a “markedly higher” natural rate of unemployment, says Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics. “It was 5.5 percent; maybe it will be 6.5 percent, maybe 7 percent.”

That has implications for policy makers as well as workers. The Obama administration and the Federal Reserve are counting on the jobless rate to fall to a medium-term equilibrium of about 5 percent as the economy recovers. A natural rate significantly above that would drive up the annual budget deficit -- which will top $1 trillion for the first time this year -- by reducing tax revenue and pushing up spending on unemployment benefits. .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aOhkusQ9LifQ&refer=home

[aquart]

1. This country needs a new killer app.

[leveymg]

2. One that only wipes out Wall Street, and leaves the rest some spending money

:evilgrin:

[sabbat hunter]

3. if you wipe out wall street

you wipe out NYC and state.

[Hannah Bell]

9. if you wipe out motor city, you wipe out michigan; wall street didn't care,

why should we care for wall street or nyc?

the financial sector is more bloated than detroit in its heyday.

[sabbat hunter]

10. because

wiping out wall street means as many jobs will be lost (middle class jobs) as losing motor city.

[Fool Count]

20. At least those jobs wiped out in Wall Street

did not actually produced anything, but only took away money from the productive
sector of the economy. So it can be argued that "wiping them out" is actually a good thing.
Imagine all that newly unemployed Wall Street "talent" applying their effort to some
productive and useful purpose, instead of figuring out ever more inventive ways of
screwing poor widows and orphans somewhere in Africa. Motor City jobs, on the other hand,
were productive to begin with and losing them will mean fewer cars made in America, not
fewer underwritten CDO contracts.

[leveymg]

13. I don't mean literally, you Ninny.

I mean, like cutting off TARP/TALF funds for AIG and zombie banks that engorged on CDS and other risky derivatives.

Yes, that might have the same effect on careers in the upper echelons of the financial sector as neutron bomb on Wall Street, but would leave the buildings (and people) still standing and ready to be put to more honest work. :eyes:

[sabbat hunter]

14. I understood what you meant

and I stand by my reply.

If you wipe out the financial sector Aka wall street, then you kill the state and city of NY which both rely heavily on revenues from wall street to fund our state.

[leveymg]

17. The financial sector has assumed a priviledged position and resources well beyond its social utility

I worked on the Floor of the NYSE when the Dow stood at 850. America wasn't poor. The index has grown 10-times, cost of living 3.5 times, nominal incomes only 3-times since the mid-1970s. What's changed is that most the other industries that once made NY the center of the world -- media, publishing, advertising, US manufacture -- are now a mere shell of what they once were.

Wall Street is still a bloated bubble feeding off the Federal Treasury. It could be cut in half, easily, and would free up capital and public money for other, more useful, employment generating enterprise. Almost all of us would be better off, including most New Yorkers. Park Avenue and the Hamptons would take a hit - let them be deindustrialized, for a change.

[sabbat hunter]

18. again

by killing wall street, you kill NYC and NYS financially due to the great amount of tax revenue that they both get from them.

[JVS]

19. An economic sector based on "Fuck you, I've got mine" and the people depending on it...

must eventually learn that the corollary to that is "Fuck you, we want it"

[PassingFair]

21. They will have to "diversify" like the rest of us.

Hello, from Michigan!

:hi:

[JVS]

22. They could go to community college to learn new skills.

[Demeter]

4. Enforcing Existing Laws Would Do That

Which is the number one reason why they AREN'T being enforced.

[ixion]

5. high unemployment = no "good times" return

and Bloomberg should be ashamed of themselves for stating otherwise.

There is NO SUCH THING as a 'jobless' recovery.

[madrchsod]

6. where do you think the "reagan democrats" came from?

the only thing saving obama right now is the republicans do not have a intelligent leader.

[SoCalDem]

7. There are just many people who are "not necessary" in the workforce

and no one in a high place sees the value of keeping these folks employed.

Take for example, ANY young person finishing high school..with or without a diploma.. Where are they going to find family-supporting jobs?

The days of getting a job at the factory with Dad or an Uncle, are Gone-baby-gone.

The "dirty jobs" are no longer even all that available, and greedy bosses look for undocumented workers, knowing that there is not a great likelihood that they will be caught..and even if caught, they will suffer less than if they had been paying a citizen a higher wage, with benefits.

Young people WILL form families, even if they cannot afford them, so every poor young person who starts a family will be planting seeds for yet another poor family that will most likely always be poor.

Middle class people cannot afford college, no matter how smart their kids are, so their kids will leave college saddled with debts they cannot handle, and their young families will start out poor and debt-ridden.

Only the upper classes will thrive, and with millions of people scrambling for the same low-level jobs, don't look for wages to rise..

We've all been set up for about 3 decades (at least) of serfdom for most, and aggressive greed for the few..

The only hope for most people, is to live a small life, with no debt, and to learn to love it...

[LiberalEsto]

8. Maybe that explains "swine flu"

and the non-stop wars. Get rid of the excess populace?

[xchrom]

11. quelle surprise - they've been trying like the devil

to turn america into a 'service sector' economy since reagan.

the squeeze on middle calss wages has been on since the seventies.

per headlines here on DU we've learned the 'green jobs' that supposedly couldn't be off-shored certainly can.

as long as the government is the servant of the corporation this is how it will be.

[xchrom]

12. oh -- and recommend nt

[autorank]

15. Return of the Phillips Curve k*r

"The Phillips curve represents the relationship between the rate of inflation and the unemployment rate. Although he had precursors, A. W. H. Phillips’s study of wage inflation and unemployment in the United Kingdom from 1861 to 1957 is a milestone in the development of macroeconomics. Phillips found a consistent inverse relationship: when unemployment was high, wages increased slowly; when unemployment was low, wages rose rapidly." http://www.econlib.org/library/Enc/PhillipsCurve.html

Insidious assumption. I remember when I heard it in Econ 101. I thought, what a load of shit.
They let people stay unemployed because they don't know how to make an economy productive without
inflation.

[rhett o rick]

16. When oh when are we going to kick these asshats out and reclaim our country? nm

[Blue_Tires]

23. +1