Dean Baker: The 'new normal' of unemployment

[marmar]

The 'new normal' of unemployment
Mainstream economists are preaching a decade of pain and historically high joblessness – as if no alternative policy existed

Dean Baker
guardian.co.uk, Saturday 15 January 2011 14.00 GMT


The American Economics Association held its annual meeting in Denver last weekend. Most attendees appeared to be in a very forgiving mood. While the economists in Denver recognised the severity of the economic slump hitting the United States and much of the world, there were few who seemed to view this as a serious failure of the economics profession.

The fact that the overwhelming majority of economists in policy positions failed to see the signs of this disaster coming, and supported the policies that brought it on, did not seem to be a major concern for most of the economists at the convention. Instead, they seemed more intent on finding ways in which they could get ordinary workers to accept lower pay and reduced public benefits in the years ahead. This would lead to better outcomes in their models.

The conventional wisdom among economists is that the economy will be forced to go through a long adjustment process before it can get back to more normal rates of unemployment. The optimists put the return to normal at 2015, while the pessimists would put the year as 2018, and possibly, even later.

Furthermore, many economists believe that the new normal will be worse than the old normal. The unemployment rate bottomed out at 4.5% before the housing bubble began to burst. If we go back to 2000, the United States had a year-round average unemployment rate of just 4.0%. The optimists now envision that normal would be 5.0% unemployment, while the pessimists put the new normal at 6.0% unemployment and perhaps higher. As a point of reference, every percentage point rise in the unemployment corresponds to more than 2 million additional people without jobs. .............(more)

The complete piece is at: http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/14/economics-economy

[Mulhane]

1. "New Normal"=3rd World USA

Nothing "new" about it. Just a return to Robber Baron days. Good job prospects for NN= military, police, jailer, undertaker.

[Skittles]

2. you know it, Mulhane

:(

[NNN0LHI]

3. Those Walmart greeter jobs I see on TV are starting to look pretty good to me

Imagine thats what I will be doing before long.

Don

[ProSense]

4. Baker's point is that the 'new normal' is BS

<...>

The prospect of an extended period of higher unemployment would be easier to accept if there was a good argument as to why the economy cannot achieve the same levels of employment as it had in the recent past. Economists really don't have much basis for this lowering of expectations of their own and the economy's performance.

<...>

If economists did their job, they would be pushing policies to get the economy quickly back to full employment. Instead, they just repeat lines about how "we" will just have to accept some rough times. Unfortunately, no one ever asks the economists who preach austerity how much time they expect to spend in the unemployment lines.

[MN TN]

5. When Baby Boomers retire, won't this mean more jobs, esp in health care?