Saturday, April 7, 2012

An update on optimism

Yesterday I hazarded a guess at today's headlines on the economy, and I was right.  The Washington Post's headline was "Hiring slows, casting shadow on U.S. recovery".  Above the fold, right hand column, big caps.    And even in the blogs, the tone was somber.   Paul Krugman said "What has actually been happening is that conventional wisdom overreacted to four months of good(ish) news, and the March numbers were a useful corrective",  and provided this graph of employment as a fraction of prime age population:

and in this you see the horrifying depth of the current recession, where the good news from the last few months is reflected in that meager uptick at the end.

I still think that there were some positive signals in yesterday's news---that may be wishful thinking, but it is what I see.  The chart he uses looks awful and is awful, but that last uptick is an uptick, and even that does not reflect the large decline in people working part time "for economic reasons".

But I do want to be clear: I'm not suggesting, and didn't suggest yesterday, that everything is now all better.  Even in the graph I used which is repeated here and shows the number of part time workers who would rather work full time, the big improvement last month still leaves the number higher than it had ever been before the current small depression.

So I'm not suggesting that we should now suddenly stop worrying about the unemployed and start worrying about inflation.  The Fed should not suddenly switch to tightening the money supply, and we should not suddenly adopt a vast austerity policy.  Unemployment is still our top issue, and will be for some time.  In fact, I want to support Jared Bernsteins closing assertion in his comments on this yesterday:

"You know what, America?  This monthly jobs report may be a one-off disappointment or it could signal that the job market is doing worse than we thought.  Either way, there’s too many un- and underemployed people out there. 

And guess what else there is out there?  There’s too many crumbling public schools, too many bad roads, too many water systems, airports, rail lines, and you name it in need of repair.  There are too many states and towns cutting back on vital services, laying off teachers, cops, firefighters.  Too many homeowners underwater on their mortgages.

So let’s marry a problem with a solution here, take advantage of historically low interest rates—a market signal that this is precisely the time to make these investments—and take out some serious insurance against the possibility that the March report is flashing red."

A large public investment in repairing and upgrading our infrastructure, a large increase in the number of public jobs, would help us get to where we need to be.

And I'll add another graph.  This one is from the Josh Bivens at the Economic Policy Institute:

This chart shows the change in public sector employment since the start of the last four recessions (I know it says the last four recoveries, but each of the lines starts at the starting point of the corresponding recession---the lines have been shifted so that the official beginning of the recovery for each recession lies on the vertical dotted line).   Notice that in the recovery from the 1981 recession, under Ronald Reagan, public employment grew at a rapid pace.  In all three of the last three recessions, in fact, public employment growth was a big part of the push toward recovery.  But this time, largely because of cuts in state and local spending, we get that red line---public employment has declined, and overall public spending has been a substantial drag on this recovery.

We're still in this thing, and we need policy to reflect that fact.

But it's still good news that the number of people employed part time who want to be employed full time has declined so substantially.   We need to take what comfort we can in these small things.

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