"In 1982 all the Fed had to do was loosen the reins, now somebody has to persuade someone to spend"

[phantom power]

First, anyone who called this a good jobs report is suffering from the soft bigotry of low expectations. The reality is that we have made little or negative progress on job creation relative to population since the recession officially ended, and this trend continues:



Why is this happening, and why do policy makers keep being surprised?

My main answer — Brad DeLong has also written on this — is that 2007-2009 was a postmodern recession brought on by private-sector overreach, very different from pre-1990 recessions that were brought on by tight money. This has two consequences. First, it’s much harder to engineer recovery from a recession that wasn’t created by the Fed; in 1982 all the Fed had to do was loosen the reins, now somebody has to persuade someone to spend more than normal. Second, forecasting models tend to be based on all postwar recessions, not just the 1990 and later postmodern recessions, so they tend to predict a much faster recovery than was ever likely.

We should also note that fiscal policy is now very much acting in reverse, as the stimulus fades out and state and local governments keep on laying more people off. So that too is preventing recovery.

http://krugman.blogs.nytimes.com/2011/08/05/notes-on-the-un-recovery/