South By North Strategies, Ltd.

The Price of Caution

Martin Wolf of The Financial Times notes that fiscal fortune favors the bold.

Debate is emerging on how much of the surge in unemployment is structural. My answer, from European experience, is that one way to ensure it becomes structural is to let it linger. In the short run, the simplest way to prevent that from happening is to expand demand and so output. Since there is huge slack in the labour market, not the slightest threat of inflation – far more a risk of deflation – and no constraint from bond or foreign exchange markets on further monetary and fiscal stimulus, these are the policies that have to be pursued. Yet, alas, the Fed seems to have decided to fall asleep and the administration has lost the initiative.
…
So what is going to happen? I assume that, after the midterm elections, resurgent Republicans will offer new tax cuts and ignore the fiscal deficits. They will pretend that this has nothing to do with any reviled stimulus, though it is much the same thing – increasing fiscal deficits, thereby offsetting private frugality. That would put the administration on the spot. It would have to choose between vetoing the tax cuts and accepting them, so allowing the Republicans to get the credit for their “yacht and mansion-led” recovery. Any recovery is better than none. But it could have been much better than this. Those who were cautious when they should have been bold will pay a big price.

Around The Dial – September 1

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

• Naked Capitalism stares critically at some Wall St. arguments.
• The Wall Street Journal reports on possible growth policies.
• David Leonhardt explains differences in tax cuts.
• Katrina vanden Heuvel opines on the state of American labor.

North Carolina and The Great Recession

Earlier this week, John Quinterno of South by North Strategies, Ltd. participated in a panel discussion on “The Great Recession” that took place at the UNC-Chapel Hill Department of City and Regional Planning.

Quinterno’s presentation, entitled “North Carolina & The Great Recession: An Overview,” is below.

The Types of Unemployment

Brad DeLong weighs in on the debate over cyclical vs. structural unemployment. His conclusion: cyclical factors currently dominate.

That is what “mismatch” structural unemployment looks like – and it is not what we have today, at least not in Europe and North America. In the past three years, employment in construction has shrunk, but so has employment in manufacturing, wholesale trade, retail trade, transportation and warehousing, information distribution and communications, professional and business services, educational services, leisure and hospitality, and in the public sector. Employment is up in health care, Internet-related businesses, and perhaps in logging and mining.
…
In the United States, the past three years have seen employment fall from 137.8 million people in July 2007 to slightly less than 130 million in July 2010 – a decline of 7.9 million during a period in which the adult population grew by six million. What we have witnessed is not a shift in demand into sectors lacking an adequate number of qualified and productive workers, but rather a collapse in the level of aggregate demand.

Around The Dial – August 31

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

• The News & Observer argues that “every job counts.”
• Economix notes the “tick up” in state revenue collections.
• Calculated Risk warns against bringing back the home buyer tax credit.
• Ezra Klein blogs about the political views of the deficit commission’s members.
• Robert Reich mentions that cheaper money won’t create jobs.