America’s economic problems predated the Great Recession

Here is a very good piece by Binyamin Appelbaum, focusing on the research of Davis and Haltiwanger, here is one excerpt:

Employment losses during the Great Recession may have had more to do with factors like the rise of Walmart than with the recession itself, two economists say in a new academic paper.

The paper, presented Friday morning at the annual gathering of economists and central bankers at Jackson Hole, Wyo., argues that the share of Americans with jobs has declined because the labor market has stagnated in recent decades — fewer people losing or leaving jobs, fewer people landing new ones. This dearth of creative destruction, the authors argue, is the result of long-term trends including a slowdown in small business creation and the rise of occupational licensing.

“These results,” wrote the economists Stephen J. Davis, of the University of Chicago, and John Haltiwanger, of the University of Maryland, “suggest the U.S. economy faced serious impediments to high employment rates well before the Great Recession, and that sustained high employment is unlikely to return without restoring labor market fluidity.”

Their findings contribute to the growing genre of papers that purport to show that the weakness of the American economy is caused largely by problems that predate the recession — and that the Federal Reserve can’t remedy them with low interest rates.

Read the whole thing.

Comments

I will read the whole thing but if indeed there are structural problems that predate the financial crash, how does one reconcile the findings of Grandmaster K. Rogoff et al. that financial crashes take 20 years, based on historical data, before they resolve themselves? Do you say that the structural problems take a generation to work themselves out? And they are always precipitated by a financial crash? If so, then this sort of backward data curve fitting becomes almost akin to metaphysics, untestable. Just as easy to take the Krugman position that the current deviation from trend is due to lack of demand, that increased monetary or fiscal spending will cure.

"Just as easy to take the Krugman position that the current deviation from trend is due to lack of demand, that increased monetary or fiscal spending will cure."

Krugman staked out the view that monetary policy at the ZLB is pushing on a string. He went so far as to call 2013 a test of market monetarism, confident that 2013 tax increases and sequester would choke off the recovery. It didn't. Monetary policy (as Sumner would say, monetary offset) proved its effectiveness. I'm sure Kruggie is furiously backtracking and engaging in revisionist double talk these days, but it's all on his permanent record.

Yea 2% GDP growth after the worst recession in 80 years and employment gains only keeping up with labor force growth is totally a success story.

Keep moving those goalposts

Yep keep denying reality.

Furious backpedaling and revisionist double talk?

http://krugman.blogs.nytimes.com/2013/04/28/monetarism-falls-short-somewhat-wonkish/?_php=true&_type=blogs&_r=1

I see so logic, economics, and reality are against your you so your response is what exactly?

It should be illegal for you to use the word "logic."

+1

Numerous people said would be a slow recovery as did I. Krugman just offers one of numerous unfalsifiable prescriptions of "more."

@Brian Donohue - the fact that a tax increase and sequester (i.e., less fiscal spending) did not choke off the recovery in 2013 is not evidence that Krugman's Rx (of more fiscal and/or monetary spending would bring back the economy to the pre-2007 trend) does not work. Arguably Krugman has not been proven wrong, even in Japan, where in the late 1990s Krugman advocated more spending than actually occurred (E. Hugh, "The ABE of Economics", has an excellent overview of Japan's malaise, and BTW he is anti-Krugman).

So, again, we are back to square one in hypothesis and metaphysics: in the absence of any historical data or otherwise, we can either fit the data to fit Krugman's 'spend-more-money, print-more-$' hypothesis, or TC's 'structural' hypothesis. Only time will tell. If Japan implodes however, as Edward Hugh predicts (and others), then it will be a warning shot that maybe Krugman's Rx is bad. However, as per the above, Krugman could argue that Japan imploded because it did not do enough quickly enough, f'(x), f''(x), 1st and 2nd derivative stuff--Scott Sumner has made the same arguments--and that the rate of or rate of change of rate of fiscal or monetary expansion is more important than the absolute level.

Economics is nothing more than speculation and virtual history type alternate world scenarios. You could say the same thing about politics ('political economy'), e.g., "Communism would work if it was not implemented as badly as it was in the USSR, etc etc etc". Same for the right: "Ayn Rand type capitalism would work if given a chance, which it never has been given". It's all smoke and mirrors and posturing. Kind of like trolling but in the real world.

Arguably, Ayn Rand type capitalism was the 19th century (see e.g. Lochner, 1905.)

Holy crap, lots of people hated it. It caused sharpies like Marx to think up a whole other way of organizing society.

Then, some countries gave that a go in the 20th century, and it was a lot worse.

So now everyone's in-between, arguing on a comparatively narrow part of the spectrum. Which is very vicious of course. The narcissism of small differences and all that.

That makes a LOT of sense Brian.

ROTFL yes the USSR which devoted total power and control to select few was following Marx who decried and advocated for equal power. It's amazing how clueless on every topic you are.

Who cares what Marx wanted?

BTW, didn't Marx say the socialism would come first? It appears you are being an ass.

@Oakchair,

1. I chose Marx in part because I thought he was a representative voice in critique of 19th century capitalism.

2. I don't have time to dwell on the doubtless fascinating world of Marxist purity laws, but the guy's whole claim to fame rests on the influence his words had in the real world, which is remarkable. Take that away from him, and he's just another 19th century scribbler whose ideas have taken unlikely root in pockets within American universities, where they can't do much harm. But I digress.

3. Maybe I'll be there to shake your hand, maybe I'll be there to share the land, that they'll be giving away, when we all live together, TALKIN' 'BOUT TOGETHER NOW!

I'm not sure about Krugman's view. "Monetary policy" if confined to manipulation of the short term interest rate IS ineffective at the ZLB in creating demand. It could still be effective in offsetting a decrease in demand from something like the sequester. Interpreting the effects of fiscal policy are tricky in that one needs to carefully specify what if any response there will be in monetary policy.

RL,

Take a look at the charts over at http://equitablegrowth.org/2014/08/18/evening-comment-male-female-prime-age-employment-rates-since-2000/

Labor market weakness up to 2000 just doesn't show up in the data. Since 2000, it's obvious and it doesn't just start in 2007/8. In my opinion, the U.S. economy started going off the rails with Clinton, but the Tech Bubble masked the decline (the trade deficit soared under Clinton). Under Bush, substantive decline accelerated (the trade deficit hit 6% of GDP), so Bush (and friends) conjured up the housing bubble (construction, MEW, etc.) to partially offset the weakness inherent in his "import everything including replacements for American workers, export only jobs" philosophy.

Of course, it didn't really work. The housing bubble wasn't large enough to offset a 6% of GDP trade deficit. The bubble was large enough to crater the economy when it burst.

The source for the employment data is the BLS via FRED via Brad DeLong.

Here's a similar idea: recessions happen. Between the 1982 recession and 2001, we had only had one mild recession.

2001 was shaping up to be a lousy year. Airlines were going bankrupt and the economy was headed into a recession.

The recession never happened.

After 9/11, we lost our fiscal mind. For years, price was no object. Geez- the wars alone! But the tax cuts, the pricey new Medicare prescription drugs, the insane housing policy. Guzzle away- don't think about the hangover. And let's be honest- it was the GOP running the show.

BD,

Bush was the ultimate "bread and circuses" politician.

Tax cuts for the wealthy, outsourcing and free trade for corporations, food stamps and no income taxes for the poor, wars for neocons, Amnesty for illegals, financial deregulation for Wall Street, housing bubbles for main street, subprime loans for the unqualified, Medicare plan D for the elderly, NCLB for Teddy K. and the education establishment, etc.

Indeed, Bush actually recruited food stamp recipients with advertising campaigns (in Spanish no less). He worked tirelessly to promote NINJA loans (the "ownership society").

None of this had to actually be paid for... Because "budget deficits don't matter"... "trade deficits don't matter"... "consumer debt doesn't matter"...

Turned out not to be true. The amazing thing is that the economy was a mess (measured by LFP and the EMPR) in spite of all of his closet Keynesianism (public and private). No surprise there. A 6% of GDP trade deficit and Open Borders swamped his stimulus schemes. The bad news is that Bush's biggest stimulus scheme (the housing bubble) triggered the Great Recession.

The deeper point is that core tenets of Bush's crazy economics ("free trade", economic hollowing out, Open Borders, outsourcing, education as a panacea, etc.) are bipartisan so nothing has changed under Obama.

Bush definitely accomplished these things all by himself. Congress spent the duration of his two terms watching NFL games in person and on TV and visiting various local scenes of disaster. The immense federal bureaucracy was mostly on vacation or attending educational symposiums in tourist centers at taxpayer expense. So Bush painted the signs in Spanish encouraging illegal immigrants to sign up for free tortillas himself. As a shameless exponent of free trade, Bush single-handedly moved American industrial might to Asia. Maybe his portrait will appear on the new renminbi.

cm,

" Maybe his portrait will appear on the new renminbi"

He certainly earned a place on the Chinese currency.

BD,

"Here’s a similar idea: recessions happen. Between the 1982 recession and 2001, we had only had one mild recession."

The 1990 recession lasted for 8 months and GDP fell by 1.4%. That puts it on the low end of post-WWII recessions. It was enough to defeat Bush (41) in the 1992 election.

"The recession never happened."

Actually it did. The NBER lists it as an official recession. It lasted for 8 months and GDP fell by 0.3%.

"After 9/11, we lost our fiscal mind."

That's true as documented in several places. However, don't overstate the case. Bush's budget deficits (pre-crash) weren't exceptional as a percent of GDP. Perhaps more relevantly, Bush's structural deficits were unexceptional as well (pre and post-crash). See https://docs.google.com/file/d/0B2A8ig6e2p6dUG53RWpsR3U4THc/edit?pli=1 for some data. The source is actually "The Deficit: Not as Bad as They Want You to Think" over at Bloomberg.

Of course, there was considerable insanity in the private sector tied to housing (and later commercial real estate). The housing bubble both expanded housing construction as a fraction of GDP (by 3% if I remember correctly) and produced an amazing bubble in MEW (Mortgage Equity Withdrawal).

The notable point is that the combination of public sector deficits and private sector borrowing wasn't enough to offset the downdraft from "free trade" and Open Borders.

The "we didn't have recessions for a long time and they were overdue" theme is not supported in the http://equitablegrowth.org/2014/08/18/evening-comment-male-female-prime-age-employment-rates-since-2000/ data. The business cycle clearly shows up. However, until around 2000, LFP and the EMPR are headed upwards across business cycles. Since 2000 LFP and the EMPR are plunging.

Mass immigration and a 6% of GDP trade deficit (the peak in 2006/7) will do that.

Well clearly there are structural problems, the lack of inflation given stimulative fiscal and monetary policy is a sign that structural problems are not the whole story. We'll only know how big the structural problems are once we get back to low unemployment and start to see inflation pick up.

Why would low unemployment necessarily mean inflation? Is that line of thinking based on the freshman economics text that says "too much money chasing too few goods"? When a shareholder sells a share of stock for more than he paid for it he has more money, just like an unemployed gandy dancer does when he gets a job with the Burlington-Santa Fe. Why aren't increases in the stock market viewed as inflationary? After all, the seller of shares doesn't have to reinvest in other shares, he can buy brie or a Rolex or even a yacht.

There were problems in the American economy leading up to the Great Depression too, and also prior to the Panic of 1873. I don't think we have an example of a financial meltdown that succeeded a wholly healthy economy.

What was churn like in the golden era of 1947-1974? I can certainly remember people saying that in that era people spent an entire career with a single employer and had something called "job security." It was also the era of strong unions and generous pensions. This paper only seems to go back to 1990. Would they have gotten very different results if they went back farther?

The labor force participation rate started to increase in the early 1970s at the same time the the boomers came of age so we developed a labor surplus and wages stagnated.
https://www.google.com/search?q=labor+force+participation+rate&source=lnms&tbm=isch&sa=X&ei=65z3U9_PGZauyATfvYG4Aw&sqi=2&ved=0CAcQ_AUoAg&biw=1536&bih=851#facrc=_&imgdii=_&imgrc=hPHfQ4p6lIdETM%253A%3ByAcogrD-99amrM%3Bhttp%253A%252F%252Fibankcoin.com%252Fnews%252Ffiles%252F2013%252F04%252Flabor-force-participation-rate-march.png%3Bhttp%253A%252F%252Fibankcoin.com%252Fnews%252F2013%252F04%252F05%252Flabor-force-participation-rate-falls-to-lowest-level-since-1979%252F%3B1503%3B1127

Isn't the spike in labor participation in the early 70s mainly from more women entering the workforce?

Also, incomes were very low. (Check the PPP GDP data.) And who would want to spend their whole life doing the same thing?

A lot of people like job security. It's especially useful to people with children and to older people. Job hopping is for the young and single.

What has been unusual cycle is not job destruction. Rather it has been the very slow rate of job creation and the factors cited above are clearly a major factor.

But this does not preclude the aftermath of the financial crises also having a negative impact.

Perhaps this has something to do with the 1 million fewer government jobs than we had in March of 2010. That's quite a headwind for the jobs recovery to overcome.

The author complains of "fewer people losing or leaving jobs, fewer people landing new ones. This dearth of creative destruction...".

Shedding a million government jobs seems like a step in the right direction. Little by little.

Its amazing how conservatives think "fewer jobs" is a step in the right direction.

Less of a negative is a positive. It's a math thing. Not up your alley.

Yes because in your land of conservatism jobs, education and infrastructure are all negative things. Come back when reality and sanity are something up your alley instead of ideological clownery

A list of things government does not do well?

It's amazing how many liberals think that if the government just employed everybody, we'd be ship-shape.

Def did not help with the Great Depression.

Its amazing how you think education, roads, science and reality are bad things

Ha! As if that is what they did anymore. I know you are new here but that is unacceptable.

And, there aren't fewer jobs. Private sector employment is 10 million higher than the trough in February 2010. This makes me very happy as an American.

The 1 million fewer government jobs only makes me happy as an American taxpayer interested in the fiscal sustainability of the regime.

Except that those unemployed people haven't disappeared. Instead of drawing a paycheck they are on the dole, in one way or another. So no, the loss of those jobs is in no sense a plus for the economy.

Fewer government jobs = more jobs.

Nothing amazing or even conservative about a <1 multiplier on average government jobs.

The cost of workfare is in productivity. It is a known.

Hell, let's just put everyone on the government payroll so there will never be unemploymemt again. What could possibly go wrong?

One million fewer government jobs?

Surely not 1,000,000 fewer federal workers. The Federal deficit has been about $1 trillion each year since Hope and Change saved us from us.

Digging in, maybe a lot of this is due to the 2010 Census hiring spike. Fed employment down 701K (3,415 to 2,714), state down 69K (5,135 to 5,066), Local down 300K (14,442 to 14,142).

But hey, even holding the line on government employment is hard enough. The past few years is the only time since WWII that we've seen anything like this, except for a brief dip in the early 1980s.

Leviathan is like Walter Payton- you can only try to contain him.

What are the numbers like if including workers such as those contracted by the government but not officially on the government payroll? I'm wondering because I don't know the details while have read comments online before that this is a significant number masking the 'actual' number of people working for the government.

Yes because you are an ideological idiot whose goal isn't prosperity but rather less government; to you its good if we have longer commutes and stupider children because in order to fix those problems we'd have to have more government

Now now now. Everyone's views are deserving of a fair hearing here.

The federal deficit is projectged to be less then 500bn this year, its lowest per GDP rate since the early 2000. So you being off by 200% either makes you a complete idiot or a hack. I'd say idiot since you are too stupid to know the difference between nominal dollars and number of people employed

Hah! 6 years after a recession we almost don't have a huge deficit.

I wish we would try Keynesianism for gd sure and I ain't even shitting you.

slam more muthafuckas all up in the economy's grill. that'll fix it.

"... and that the Federal Reserve can’t remedy them with low interest rates."

I think that was intended to make Scott Sumner's head explode.

I've been automating away jobs for the last 20 years (as well as watching them shipped to other countries) and often times I've wondered what some of those people were ever going to do as they had fairly limited skills. Seemed to me the credit bubble just delayed the inevitable.

(The use of "credit bubble" was intended to make Scott Sumner's head explode.)

http://www.washingtonpost.com/blogs/govbeat/wp/2014/07/15/after-years-of-cuts-state-budgets-show-surpluses/

Maybe the states could spend some of those surpluses on new workers and boost consumption.

If I were in charge, I'd also consider setting aside a large chunk of it to begin repairing public pensions, rainy day funds, overdue infrastructure repair projects, etc. Hiring more teachers and fire fighters might sound better for the headlines but it's a disaster for the budget if the pensions can't be paid for.

No we cant have government help the economy because my ideology says government cant do anything.

Or because monetary policymakers are the last mover

This should come into play at a decent growth rate. The Fed shouldn't be slow walking it this badly. I suspect we will see soon enough that they weren't.

Guh. You talk like it's 1915 and income taxes are unconstitutional. Governments in the US will collect $5.7 trillion in taxes this year- $17,000 per citizen.

We can't have MORE government largess for the foreseeable future because (a) we already have $17.6 trillion on the gubmint credit card, most of it from this century, (b) despite the 'savage austerity' of the past year, we continue to put another $500 billion per year on the card, and (c) there is a demographic tsunami related to Boomer retirements coming in the next several years that is so obvious even an economist can predict it and will put enormous strain on government finances.

Sorry folks, parks closed. The moose outside should have told you.

Boomers run their government just like they are running their families. Sorry kiddo's, should have worked harder.

Maybe it's not austerity that's killing government jobs but actually the soaring cost of providing entitlements to current and former public sector workers.

NYC has gone from spending under 2% to nearly 11% of its annual city budget on pension costs. LA's pension burden grew by 25%/year over the past decade! Many major cities are in a similar situation. That's bound to divert funds away from hiring teachers, social workers, cops, sanitation workers, DMV paper pushers, etc.

So in your mind education, health care, roads and keeping people out of poverty are largess. Did you recently go brain dead or have you always been a dumbass?

Yeah, you're correct. I clearly stated above that ALL of the $5,700,000,000,000 collected by the government this year went to largess.

After meditating on your sage comment, I now see that exactly $0 of the $5,700,000,000,000 collected by the government this year went to largess.

Another point.

As taxes have gone up, the underground economy (at least in CA and the tri-state NY area, where I spend time) has exploded. I don't know what the uberrrich do to evade taxes, but down on the streets, people are working off the books in massage (not prostitution), pedicure parlors, tutoring, golf coaching, cigarette sales, home repair, gardening, carpentry, child care, housekeeping and sundry other activities.

It appears that the cost of filing taxes and paying taxes (and let's remember, low earners collect vastly more in SS and Medicare than they pay into those systems) is too high even at the lower end of the income scale.

It's only going to get worse when the boomers retire. I don't see a solution here.

The superrich don't need to evade taxes. After paying 40% of their income to the government, they're still rich.

Maybe masseurs, pedicurists, dog walkers, etc. do need to evade taxes. I don't mind paying cash for these services, and I don't begrudge their providers Social Security and Medicare benefits. They're working - W - O - R - K - I - N - G.

Actually, Larry, it bugs me.

I am not in either group. But it seems to me that if everyone paid his (scandalously high) taxes, the country and every state would run a surplus.

Of course that would never happen. And if it did, we'd only have more government and more apparatchik sclerosis.

Taxes have not gone up. The total amount the government consumes from the economy has been quite able, though with fluctuations.

It appears that you are asserting that high taxes lead to increased "massage (not prostitution), pedicure parlors, tutoring, golf coaching, cigarette sales, home repair, gardening, carpentry, child care, housekeeping and sundry other activities."

Granted these are state and local taxes, and not the federal income tax which is the usual bugbear.

And I'm not saying this is wrong. But its a really interesting assertion.

Not ideology, reality.

I told bill, the prior you, nothing would be enough. It wasn't.

Not tried? Fine. Never will be.

I'm suddenly looking forward to posts from prior_approval. He's less boring and obnoxious than you.

This paper is a pile of tendentious blither and should never have been published. It shows that the conference it's being presented at is declining in quality.

As the other commenter said, our best economic successes happened during a period of nearly-zero labor market fluidity. The paper is disproven by history. It's clearly just pushing a dishonest political agenda.

There's a crude poetry in the phrase "the annual gathering of economists and central bankers at Jackson Hole".

We need a deeper hole. And a huge toilet seat.

Drone with a Hellfire.

"a period of nearly-zero labor market fluidity." I would like to have seen that. By the measures the authors use, such a time has never existed.

Do tell us more about the paper's political agenda. It's a barrage of facts from the data along with a few regressions.

We aren't going to be creating many jobs here as long as emerging markets maintain high current account surpluses to create jobs there. We aren't going to be creating many jobs here as long as we don't want to.

Great recession didn't even clear out all the ZMP workers much less fix housing prices. It's going to be a slow ten years.

I had a problem with the paper. It's about the effects of labor market fluidity and worker reallocation rates. My problem is that the paper is riddled with "the evidence suggests", "it seems likely", etc. Since they're trying to document how these issues have been hurting the economy, I'm hardly surprised that they found some evidence for it. That's okay, because it does seem likely to me that there are some negative effects on the economy from these issues. But I've ended up just where I began, since I still need to consider other possible problems that have been hurting the economy. I just didn't see any evidence of it trumping other possible causes. Indeed, some other causes they did not consider might be effecting the issues they've raised.

We were talking about (or ignoring) the twin drivers of globalization and automation before the Great Recession. I'm sure we'll talk about them a little, and ignore much more, in the years to come. It is now just a given that Chinese wages are part of our US labor picture. Designed in California, manufactured in China. Long since home to roost.

The sage authors, posters and bloggers are advancing hypotheses of which many could be true! Aside from a few purely macro hypotheses, they don't contradict each other. It may seem like "smoke and mirrors", but yhay's because carrying our convincing statistical analysis to discriminate among the hypotheses is DAMNED HARD.

“I would have lost more. But, that was all the money I had.” Said Groucho Marx, 1929 who had borrowed against his life insurance policy and his house to meet bank stock loan margin calls.

A sensible, even obvious conclusion. Is there anyone who thinks that the ONLY problem with the US economy is the failure of the Fed to maintain ngdp growth?

Not even Scott Sumner.

Color me skeptical. Employment is a lagging indicator. I don't carefully track national unemployment rates, but in Colorado, where I live, we've had 33 consecutive months of employment growth and the unemployment rate has fallen to 5.3%, which isn't the 2%ish that economists call "full employment" but is much better than it was during the Great Recession. There is every reason to think that there is more job recovery to come. So, it is premature to conclude that the Great Recession will produce a long term decline in employment.

Also, even if there is a decline in employment, that doesn't necessarily mean that there is something wrong with the economy. At the pre-Great Recession peak, employment participation rate were near an all time high, and the number of hours worked per capita in the U.S. was higher than any economy of any size in the world, since we take so few vacations and work relatively long hours and have a high labor force participation rate. Adjust the numbers for quite high levels of higher education participation in the U.S. compared to its international developed world peers, because learning to work is work too, and we may have had an irrationally high level of employment that is now merely returning to more "normal" levels.

Another healthy sign is that a lot of the decline in employment is attributable to men in blue collar occupations who go on disability before ordinary retirement age. While lots of middle aged men having disabilities isn't great, this does mean that the labor force is shrinking in a relatively low wage sector and that it is shrinking in a part of the economy where there is declining long term demand for labor in the economy. It would be far more troubling is the decline in working age men in the workforce were due mostly to high income professionals retiring early because they have enough money to support themselves without additional labor. That would be a sign that there were deep flaws in how we were compensating high income workers in a way that was depriving the economy of scarce human capital that it needs direly to function in a modern economy.

"While lots of middle aged men having disabilities isn’t great..."

Of course they're not really disabled. And that is not good news - it means they're ZMP workers - unemployable.

I wonder if they'd be unemployable if we enforced disability fraud legislation. Human ingenuity is a beautiful thing.

Very few people on disability are not disabled in some way. The medical standards are pretty stringent and hard to fake one's way around. In a "hot" economy some of them probably would be working. In this economy however employers have decided that these people are too disabled (or sometimes just too old) to hire. Blame HR departments and assorted other personnel management folks.

If the economy heated up and we had actual labor shortages many of those people would not be "unemployable".

The paper tells us that the problem is micro, not macro! Occupational licensing, healthcare tied to jobs, high gas prices - each one weighs down on the economy, slowing job creation, reducing the V of labor. At the same time the M of labor is flat or declining (boomer retirement, tight immigration, Mexicans returning home, more years spent in college). Sort out the micro and you can reverse both trends.

If licensing and regulations on labor related things were eliminated, would Wal-Mart be forced by the market to pay $15 an hour to new hires and provide full benefits to all its workers?

If not, how does wage theft, killing workers on the job, having incompetent people killing customers (eg, hair treatment people using mercury compounds for the same reason they were used on felt hats), help families with too little income because or the race to the bottom on wages and hours as businesses struggle to take a larger share of the declining income of the majority of families from the race to the bottom on labor costs.

Somehow, the connection between consumer spending and worker income has been ignored increasingly over the past three decades.

If gas costs less, then that means you can use gas to kill jobs, but the lower price of gas means labor costs are lower meaning lower incomes for oil industry workers. The past three decades of coal is been one of doubling of the producing, generally increasing destruction of the air and water that others depend on, and the labor income of workers is down drastically as the wages are lower and number of miners is slashed.

The economies of the coal mining States have not improved over the past three decades as a result of lower labor costs and the freedom to destroy the land without cost. Blow the top off a productive forested mountain, fill the valley, pollute the spring water, leave wasteland that will not produce lumber for centuries has not made the Appalachian communities better off.

I remember the intention of the various EPA laws was to have the coal power plants cleaned up by the 80s as the half century end of life plants were replaced with modern technology to end the acid rain. Instead, the end of acid rain identified in the 50s is only beginning to occur with the Northeastern forests finally beginning to recover.

And the decades of the Ohio valley polluting with coal produced cheap electric rates but no middle class jobs, while the Northeast had high electric rates and better job creations, but suffered the costs of Ohio valley pollution. But dealing with the pollution did require hiring workers, and higher prices, which you argue would result in worse outcomes than occurred in the Ohio valley.

I have a dream - that someday the entire economics profession is going to wake up one morning and realize "Oh My God - the Financial Crisis was a symptom, not a cause!"

Can't restructure if you can't get out of debt. Can't get out of debt because the money supply is debt. So add more debt, and make restructuring even harder and more costly. Keep doing this until it works.

The Boomers are gone and are not coming back. Stop evaluating periods under one scope.

The labor markets is about 80% recovered from the recession. Meaning, that less jobs are needing, less growth=higher growth of the past. Sorta like in 1850 it took 4% growth to have any income growth at all. Now it is 2%.

When the echo's come into the labor markets in future years, the economy will have to grow a bit faster and job growth will need to be a bit more. It isn't rocket science. You either adjust for demographics or you get blown away by failed data.

The obviously correct part of the story, which this paper mostly misses, is that the real estate boom was largely concealing the offshoring of blue collar manufacturing jobs.

This paper's claiming a stagnation for basically regulatory reasons, which is dubious. It's all about costs. It's relatively very easy to start a business in the US, but relatively very expensive to employ capable staff. Hence Walmart's strategy of creating a distribution system that can be mostly staffed by the not very capable but cheap.

>It’s relatively very easy to start a business in the US

This is the least-true thing I have read in quite some time.

Source: I started a business in the US.

My wife just started a business. Took her an hour for the LLC and sales tax registration. Took the bureaucrats a few days total. Granted some professions and types of businesses eg producing food for retail sale are highly regulated. But generally it's easy to start a business in the states. There are few places where it's easier. I know Singapore gets higher ease of business rankings but from what I know that has more to do with them going out of their way to be best in the WB's rankings criteria than with it really being easier there.

You probably mean it was very difficult to build your business up to a point where you were making money. My guess is that's because it was a competitive market. I don't know anything about your case, but the high cost of hiring capable staff is a big problem for the vast majority of US small businesses.

Not just offshoring, but also automation, which is arguably a far greater destroyer of blue collar jobs than offshoring is.

No, that's not arguable, that's completely contrary to the facts. There are more manufacturing jobs serving the US market than ever before, it's just that most of them are in Asia. Most of the manufactured goods in your life are still produced on labor-intensive assembly lines.

The Luddite error is to imagine that automation replaces labor with machines. Automation supplements human labor with machines, allowing people to make more stuff.

How to get published: Insist that the disastrous US economy has nothing to do with Obama's policy decisions, and besides, he's "only had six years" to do anything.

How to get published and invited to NYC cocktail parties: Blame Wal-Mart! They're not even unionized, the bastards!

Comments for this post are closed