This week, in an interview with CNBC, Joseph Stiglitz commented on why the strong stock market is not an indication of an accelerating recovery:
“The reason the stock market is high, in part, is that interest rates are low, wages are low and the emerging markets are still growing much faster than the U.S. economy, let alone Europe…These very strong stock market prices are in a sense a symptom of the weak economy, not a symptom that we are about to have a strong recovery to our real economy,…Remember, labor force participation is at very, very low levels, much lower than before the crisis. Real wage increases have been very weak, well below what they should be if we were having a robust recovery”
Matt Yglesias gives eight reasons why the recent upswing in inflation hysteria should be ignored. With six of of the reasons having to do with employment and the slack in the labor market. The most alarming reason highlighted is the enormous 5 million “missing worker” jobs gap:
“…over 3 million of them are in prime working years and another 1.5 million are below the age of 25.
Macroeconomic policy dedicated to preventing currently employed workers from ever securing a raise essentially guarantees that no employer will ever face a strong business case for taking a risk on these missing workers. Yet keeping millions of able-bodied adults out of the workforce will do permanent harm to the American economy.”
Tim Duy also addresses the unnecessary inflation hysteria and how the Fed has had a strong track record since Chairman Volcker of being able to keep inflation down. He concludes that:
“If you are betting on inflation over the medium-term, primarily you are making a bet on higher core inflation. More to the point, you are betting against the Fed. You are essentially betting that the Fed will not do what it has done since Federal Reserve Chair Paul Volker (sic) – tighten policy in the face of credible inflationary pressures. I would think twice, maybe three times before making that bet.”
Over at Al Jazeera, Dean Baker, the co-director of the Center for Economic and Policy Research, outlinesthree paths to full employment. His assessment of the current recovery is unsettling:
“Simply to keep pace with population growth, the U.S. needs to create roughly 90,000 jobs a month. Even if the economy creates jobs at the 270,000 rate of the last three months, which no one expects, it would not get back to full employment until the middle of 2017. At a more realistic but still optimistic pace of 200,000 jobs a month, the U.S. wouldn’t get back to full employment until late 2019.
The prospect of waiting another five years to reach full employment is not acceptable. It means that millions of people are being needlessly denied the opportunity to earn a living. Also, since most workers are not able to see wage gains in a weak labor market, continued high unemployment means that most of the gains from economic growth will go to those at the top. That the current jobs situation is better than during the worst of the downturn is hardly something to cheer about.
The absurdity is that economists know how to get back to full employment.”
Finally, at the Wall Street Journal, Josh Bivens, from EPI, states the case why wage growth should not be a problem and should be welcomed:
“These arguments essentially treat a pickup of wage growth as a problem to be guarded against. But the most conspicuous failure in the U.S. economy over the past generation, by far, has been too slow wage growth for the vast majority of American workers…
So one part of the “how much slack” debate that too often goes unaddressed is that there is not only a lack of evidence that wages are about to start growing rapidly but also that it wouldn’t be a big problem if they did. In fact, it would be a good thing.”