The Shape of the Job Market
Antonio Fatas shows (as seen above) that “The US labor market is not working” by comparing OECD countries and the change of 25-54 year olds labor participation rate.
“The US has gone through a major crisis after 2008 with devastating effects on the labor market but so have other countries. In fact, most European countries have done much worse than the US in terms of GDP growth during the last 6 years. In fact, with the exception of Portugal, Greece and Ireland, the US is the country with the worst labor market record for this age group if we compare the 2012 to the 2000 figure.”
In the article “Help Wanted” written for Foreign Policy Magazine researchers at the McKinsey Global Institute highlight five trends that are affecting the labor market.
Technology is changing the nature of work (growth in “interaction” work which causes job growth for upper and lower income jobs with middle income jobs disappearing)
The growing skills mismatch (Advanced economies are demanding a more educated workforce)
Geography matters (Unemployment is not evenly dispersed and the younger workforce is less willing to relocate for employment than previous generations)
Growing pools of untapped talent (“especially among the young, women, and people approaching retirement age”)
Disparity in income growth (income is growing more rapidly for top income earners and stagnating of low wage earners)
Richard Florida from The Atlantic focuses on geographic mobility and finds that “Americans are moving less because they’re changing jobs less often, and they’re changing jobs less often because the money to be gained from doing so just isn’t as good as it was in the past.”
Wonkblog reminds its readers that long-term unemployment is still very high and that the risk of joining the long-term unemployed is still very real for many Americans.
“we also know that the long-term unemployed are like the short-term unemployed in every way except for how long they’ve been out of work. So we don’t know why so many more short-term unemployed people are becoming long-term unemployed today than in the past—unless it’s the economy, stupid. And it is the economy. Ben Casselman of 538 has already shown that the best predictor for how long you were unemployed was the unemployment rate when you lost your job…. if you become unemployed today, you still have a higher chance of becoming long-term unemployed than you would have at the worst point of the tech bust… There’s no reason to think that the long-term unemployed are necessarily lazy or lacking skills…. The lesson here is that we need stimulus…. Nobody should lose their career because they lost their job at a bad time.”
On the Fed Front
Wolfgang Münchau of the Financial Times argues that central banks should shift their policy of inflation targeting to price level targeting:
“Now consider an alternative policy. Instead of keeping prices rising at a steady rate, the central bank tries to hit a predetermined price level each year. If price rises undershoot the target in one year, the pace has to be quickened the following year to make up the gap.
For a borrower who takes out a 10-year loan, a price-level target offers more certainty, since missing the target in a single year need not any longer affect the average inflation rate for the decade as a whole.”
Brad DeLong takes inflation hawks to task for their perpetual fear that hyperinflation is just around the corner. Highlighting Mike Kinsley and his multiple predictions. While also finding the FOMC’s response and future economic plan lacking:
“Yet, as has been the case since the mid-2000s, the Federal Reserve’s Open Market Committee has few or no voices on the activist side of its consensus policy path when it’s extremely heavy weight on the price-stability part of the dual mandate. And this has meant that since the mid 2000 Federal Reserve’s Open Market Committee has been far behind the curve with the actual course of future events rarely considered even as unlikely scenario.”
“And without going all Rikki-Tikki-Tavi–without running and finding out–how will we learn whether the FOMC over 2014-16 is continuing its serially correlated errors of policy or not?”
The Fed, committed to a consistently hamstrung economy: Tim Duy summarizes and gives his impression of a recent speech by New York Federal Reserve President William Dudley:
“New York Federal Reserve President William Dudley gave what was both an interesting and depressing speech. Interesting in that he provides some new thoughts on the exit strategy. Depressing in that he outlines a case for persistently low interest rates. One wonders why, given such an outlook, the Fed is so firmly focused on the exit strategy to begin with, rather than accelerating the pace of the recovery.”