Policy Points

10.12.2009 Policy Points Comments Off on Few Jobs, Many Seekers

Few Jobs, Many Seekers

From the Economic Policy Institute’s analysis of the latest Job Openings and Labor Turnover Survey

The latest Bureau of Labor Statistics report on Job Openings and Labor Turnover Survey (JOLTS) shows that the number of new job openings decreased by 80,000 in October to 2.5 million. At the same time, however, the number of unemployed workers increased by 558,000 to 15.7 million. As a result, there were 13.2 million more unemployed workers than job openings in October, or 6.3 job seekers per available job …. Given the large number of job seekers per job opening, it is unsurprising that the jobless are getting stuck in unemployment for long periods and that the labor market is seeing record rates of long-term unemployment.

10.12.2009 Policy Points Comments Off on The Right Debate

The Right Debate

Economist Brad DeLong discusses the debate about job creation the country should be having:

Right now, if you ask the decisive members of congress—by which I mean the Blue Dog Democrats in the House, or the most conservative Democrats and most liberal Republicans in the Senate —why the president and the Congress are not doing more to reduce unemployment and boost spending and income, the answer you’ll get is … well, you probably wouldn’t get an intelligible answer.

But if you did get an explanation for the lack of congressional action it would go something like this: Attempts to move supply and demand in the market for savings in order to boost spending would (a) increase the national debt burden on future taxpayers and (b) lead to a large decline in bond prices and a boost in interest rates. Why? Because businesses would try to increase their liquidity to support higher spending, driving up interest rates, which, in turn, would cause businesses to cut back on investment, thus neutralizing most or all of the stimulative policies.

Similarly, if you were to ask the Federal Reserve why it isn’t doing more to reduce unemployment and boost spending and income, the answer you would get is this: Spending is in no way constrained by a shortage of liquidity. We have already done all we can do, indeed we have “flooded the zone” with liquidity. As a result, the Fed is disinclined to pursue additional tweaks of supply and demand in the market for liquidity because it fears such efforts would fuel destructive inflation in the future without boosting employment and spending in the present.

Both of these arguments are comprehensible; each might well be true. But they cannot both be true at the same time. Either the economy is so awash in liquidity that the Federal Reserve cannot do much to boost spending—in which case additional spending by the government won’t generate any substantial rise in interest rates. Or additional government spending will crowd out investment as businesses scramble for liquidity and interest rates rise—in which case the economy is not awash in liquidity, and quantitative easing by the Federal Reserve could do a lot right now to boost spending and employment.

It appears that what we have here is a failure to communicate.

09.12.2009 Policy Points Comments Off on Around the Dial – Dec. 9

Around the Dial – Dec. 9

Economic policy reports, blog postings, and media stories of interest:

09.12.2009 Policy Points Comments Off on A Changing Dollar

A Changing Dollar

Last Sunday’s edition of The New York Times offered a nice graphic showing the household consequences of changes in the value of the dollar.

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08.12.2009 Policy Points Comments Off on Around the Dial – Dec. 8

Around the Dial – Dec. 8

Economic policy reports, blog postings, and media stories of interest: