The real question facing the nation, and one that Obama’s summits and speeches aren’t addressing, is this: What if the job losses this time around aren’t temporary, the “ebb” part of the ebb and flow of the business cycle? What if employers are hacking away at their permanent workforce?
There is support in the data for the idea that many of the lost jobs aren’t coming back.
While the labor market may be witnessing the beginning of a cyclical improvement, “the structural outlook is daunting,” said Neal Soss, chief economist at Credit Suisse. Today’s labor market may have become less flexible, Soss said. Employee skills aren’t readily transferable. An assembly line auto worker may not have the skill set suited to software programming or sales.
In another version of his we-inherited-this-mess speech, Obama laid out some pre-existing ideas for job creation -- infrastructure spending, small-business tax credits for hiring and enough green investment to make the average unemployed person red in the face -- and some new ones. For example, the elimination of the capital gains tax on small business and new credit lines will facilitate access to credit and make investment more lucrative.
The president paid lip service to “fiscal responsibility,” reiterating his pledge to halve the deficit by the end of his first term. How his grand vision for health-care expansion, billed as reform, will achieve that is anybody’s guess.
The deficit isn’t as benign as some economists claim. Debt, the cumulative result of deficits, is closely allied with job growth.
In their book, “This Time is Different: Eight Centuries of Financial Folly,” economists Carmen Reinhart and Ken Rogoff document the protracted aftermath of financial crises in terms of their depth, duration and diffusion across the economy and industries.
“The true legacy of financial crises is more government debt,” Reinhart said in a presentation at the Federal Reserve Bank of Philadelphia’s Policy Forum on Dec. 4.
High government debt is associated with slower growth, she said. So “if we are concerned about growth, we should be concerned about debt.”
The same could be said about jobs. Economic growth is the best source of job growth. If growth is curtailed by soaring government debt, job creation will be sub-par as well.
The government can’t keep shoveling out money to “create jobs,” concoct some fictitious number of jobs that were created or saved and expect the public to buy it. Like the $787 billion stimulus, spending money to save money is not a winning strategy.
10 December 2009
Forever Is A Mighty Long Time: Will Jobs Lost Be Gone Forever?
Excerpt from Bloomberg: Jobs Lost in Great Recession May Be Gone Forever