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December 17, 2010

Roosevelt Institute economists: we're seriously boned on unemployment

This is an interesting study coming from a plainly left tilting organization.

Key takeaways:

1) Mechanisms for people to reenter the workforce have collapsed.

2) "it has never been more likely than it is now for the unemployed to leave the
labor force over finding a job in the labor market. This is a brand new phenomenon in this recession."

2) The authors argue the NAIRU rate for the USA should be raised from ~5.2% up to 8%. The NAIRU analysis is an attempt to estimate the point where employment declining below a given percentage triggers inflation. NAIRU appears to be roughly related to what was commonly referred to as the "structural unemployment rate".

Back in the Carter era, "structural unemployment" was pretty close to that 5.2% figure. Boosting that to 8%, may indeed reflect the "new reality" since the situation we're in right now is far worse, in terms of long term outlook, and possible "fixes", than the Carter era. We're out of options. All the sleazy accounting tricks have been pulled already. All the trust funds have been looted. As the old pilots saying goes, we're out of altitude, out of options, and out of time.

If the author's NAIRU rate conclusions are correct, we could expect a healthy dose of inflation (beyond the Fed's loopy currency devaluation QE crap) to ensue as the unemployment rate approaches 8%.


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posted by Purp at 07:35 AM

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