Paul Krugman: Twilight Zone Economics

[Dudley_DUright]

For about 20 months the U.S. economy has been operating in a twilight zone: growing too fast to meet the classic definition of a recession, but too slowly to meet the usual criteria for economic recovery. There's nothing particularly mysterious about our situation. But recent news coverage and commentary — in particular, the enthusiastic headlines that followed a modest increase in growth and a modest decline in jobless claims — suggest that some people still don't get it. So here's a brief refresher course on twilight zone Economics 101.

Since November 2001 — which the National Bureau of Economic Research, in a controversial decision, has declared the end of the recession — the U.S. economy has grown at an annual rate of about 2.6 percent. That may not sound so bad, but when it comes to jobs there has been no recovery at all. Nonfarm payrolls have fallen by, on average, 50,000 per month since the "recovery" began, accounting for 1 million of the 2.7 million jobs lost since March 2001.

Meanwhile, employment is chasing a moving target because the working-age population continues to grow. Just to keep up with population growth, the U.S. needs to add about 110,000 jobs per month. When it falls short of that, jobs become steadily harder to find. At this point conditions in the labor market are probably the worst they have been for almost 20 years. (The measured unemployment rate isn't all that high, but that's largely because many people have given up looking for work.)

All this leads to a great deal of suffering — not just lost income, but also the anxiety and humiliation that come with long-term unemployment. Is relief in sight?

more...

http://www.nytimes.com/2003/08/15/opinion/15KRUG.html

[glitch]

1. more reason from Krugman

Nice close:

...All this is, of course, an indictment of our economic policy — a policy that has managed the remarkable trick of generating immense budget deficits without giving the economy much stimulus. But that's a subject for another day.

Good articles deserve a bump!

[librechik]

2. kick

[shirlden]

3. Any one know of any other economist

who has the guts to tell it like it is ??

:kick:

[Dudley_DUright]

4. Actually yes

George Akerlof, professor of economics at UC-Berkeley and 2001 Nobel Prize winner recently said of George Bush: “I think this is the worst government the US has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign policy and economics but also in social and environmental policy.” Now that is telling it like it is.

http://www.abs-cbnnews.com/abs_news_body.asp?section=Opinion&oid=30489

[Yavin4]

5. Something That Krugman Missed

Most of the 2.4% "growth" was because of massive government expenditures into the economy because of the war. In fact, the GDP figure is grossly misleading because the government alone can spend enough to make it look like the economy is indeed growing. Also, you have to take into account that the Fed lowered interest rates in the second quarter to 1%.

IOW, we're counting deficit spending by the government and cheap debt from the Fed as a sign of economic growth. Counting debt as equity is exactly what Enron did.

[aquart]

6. Did you email that to him?

Because it's a good, albeit terrifying, point.