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after the great Recession

after the great Recession

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after the great Recession

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  1. April 17th, 2010 Heidi Shierholz Economist, Economic Policy Institute National Association of Planning Councils 2010 National Conference after the great Recession

  2. First things first, Where are we now?

  3. Technically, recession is almost surely over

  4. But over for whom??

  5. Payroll employment (the number of jobs)

  6. The jobs gap

  7. Layoffs now at pre-recession levels Source: Bureau of Labor Statistics, Job Openings and Labor Turnover survey

  8. But hiring still incredibly low Source: Bureau of Labor Statistics, Job Openings and Labor Turnover survey

  9. Unemployment rate Source: Bureau of Labor Statistics, Current Population Survey

  10. Unemployment for various groups

  11. Underemployment

  12. Long-term unemployment (more than six months)

  13. Job seekers per job opening

  14. The Worst Recession since the Great Depression? Absolutely

  15. GDP growth in a recession, a comparison

  16. Employment loss in a recession, a comparison

  17. What’s In store?

  18. But, the short- and medium-term are going to be ugly. The recovery in the labor market is going to take a very long time. Important – we Do not have to settle for Permanently High unemployment!

  19. To fill the 11 million jobs-gap by March 2011, we would need to add 1 million jobs every month between now and then. To fill it by March ‘12, need 559,000 jobs per month. To fill it by March ‘13, need 408,000 jobs per month.   To fill it by March ‘14, need 333,000 jobs per month. To fill it by March ‘15, need 288,000 jobs per month. Employment growth needed to fill in the gap Source: Author’s analysis of Current Establishment Survey data.

  20. Unemployment, 2015 Source: Author’s analysis of Bureau of Labor Statistics, Current Population Survey data

  21. Real Middle Income, 2015

  22. Poverty, 2015

  23. MORE SPENDING FOR JOBS! (Important subtext: ARRA worked, but wasn’t big enough) What should be done?

  24. Impact of Recovery Act I

  25. Impact of Recovery Act II

  26. But What about The deficit?

  27. Perhaps counterintuitive, but true! A key way to bring the deficit down is to deficit spend to create jobs

  28. Sources of increase in the budget deficit

  29. Case against deficits in a healthy economy • In a healthy economy, the private sector is borrowing all the available “loanable funds” to make investments. (Investments are good, because they lead to productivity growth, and productivity growth is what leads to rising living standards.) • If the government runs big deficits – i.e. also wants to borrow a lot – then it is competing with the private sector for those loanable funds. This competition bids up the price of those funds – i.e. bids up interest rates. • Higher interest rates lead to less private-sector investment – i.e. government borrowing “crowds out” investment. And that is bad (see above!)

  30. But right now, private borrowing is WAY down

  31. And private savings is way up!

  32. And note: we’re not relying on foreign lending

  33. In short, Right now there is plenty of room for the government to borrow without causing anything bad to happen!

  34. So deficit spending is what we need in the short run. But what about the long-run? What’s the Root cause of our long-run deficit problems?

  35. In longer-run, we have a health-care problem, not a social security problem Spending on Social Security, % of GDP

  36. Spending on Medicare and Medicaid, % of GDP

  37. It’s all about runaway health care costs, NOT an aging population

  38. For more information Heidi Shierholz 202.533.2560 Economic Policy Institute 1333 H Street, NW Suite 300, East Tower Washington, DC 20005-4707 202.775.8810

  39. Extra slides

  40. Public sector controls costs better

  41. The time to worry about foreign lendinghas passed…

  42. And the problem was about trade,not budget, deficits

  43. And, trade deficits are driven byover-valued dollar, not fiscal profligracy

  44. Generational inequity? Those determined to worry about generational distribution need to focus on trade, not budget deficits Budget deficit => higher taxes tomorrow, but these higher taxes just get recycled into higher interest payments for bondholders Trade deficit => excess of imports over exports financed by transferring ownership of domestic assets to foreign lenders – money spent today that really does get foregone tomorrow

  45. Time to reassess III:inflation

  46. Year over year change in CPI

  47. Too much money chasing too few goods?Make more goods!

  48. Why is deflation bigger worry? Increases real burden of a given debt $1,000 mortgage gets more and more burdensome if prices/salaries begin falling Increases real interest rates real interest rate = nominal rate - inflation

  49. Effective federal funds rate