Network News

X My Profile
View More Activity

Larry Mishel: The recession is not over

Mishel-8586.jpg

Larry Mishel is a labor economist and president of the liberal Economic Policy Institute. Earlier today, I spoke to him about the possible end of the recession and the economic outlook for next year.


There's been a lot of talk about the National Bureau of Economic Research's efforts to date the end of the recession. But you think that's confusing people.

The business press and the economists are talking past people on this. The discussion is over when NBER, which was founded to study the business cycle, will date the end of recession. The purpose of this is a research purpose. An accepted definition of when the recession began and ended helps everyone study business cycles. But when people think of the end of the recession, they're not asking when the economy stopped shrinking and began growing. It's when things are returning to be more normal.

And how would you date the end of the recession, or at least advise people to think about it?

If you believe as I do that a good economy is one where people see broad-based income growth, you have to look at a couple of things. Median family income in 2010 will be lower than in 2009. Unemployment rate increased in that year, and we're at historically low wage growth. And I wouldn't even bet on 2011 being better.

People talk about jobless recoveries -- how our unemployment lingers longer today than it used to, and how they worry it will linger for particularly long this time. What's your view on that?

I accept that there's different behavior in recessions starting in the '90s. Productivity actually accelerates rather than decelerates. In earlier times, productivity actually slowed down. That means that if you have productivity growth of 5 percent, as we did over the last four quarters, then if you're going to create any new jobs, demand and output have to grow by at least 5 percent, because the same people working a year ago can produce 5 percent more. So you need to actually grow very fast to create jobs. But we're seeing slow growth.

What's your forecast, then?

If you want to be pessimistic about prospects for the next year, and I am, I'd point to three things: Forecasters assume productivity growth will come back down rather than remain high. But if it's just 1 percent faster than normal, that's a million-and-a-half jobs we won't get. Secondly, there's a huge issue with the missing labor force. There was a giant decline starting last May, and the fact is that as we create jobs, it's unknown how many of them will return and start looking for work. That means there's no easy translation between job growth and unemployment. And third, we know there's been a dramatic erosion of work hours, and it's not clear to me that the models account for the fact that employers might first increase work hours before they increase jobs. And if you take all that into account, there's a substantial possibility that we may not dent the unemployment rate this year. In fact, if you look at the Goldman Sachs projections, they see unemployment peaking next year.

That's depressing.

Whats even more depressing is the response of the political class, who've basically told America you're just going to have to tough it out.

What would you advise them to do?

First, it's not all that hard to provide the basic safety net of unemployment insurance, which not only helps victims but injects money into the economy. But they just voted to extend unemployment insurance for one month! Another is to provide relief to state and local governments. Their retrenchment this summer and fall will cost us roughly a million public and private sector jobs. Third, we should definitely be pursuing the bill introduced by George Miller to assist local governments and community-based organizations in the direct hiring of workers. Fourth, we should not be dillydallying on transportation infrastructure and I think we could do a whole school modernization and rehab program this summer. Fifth, we've already had a debate on a jobs tax credit, but what got passed, the Schumer-Hatch version, was a pretty misguided version. Misguided and small. So that was a missed opportunity. It was a great example of how bipartisan doesn't necessarily mean good policy. And we should not be putting fiscal policy into neutral next year, which the Obama budget does. Unemployment will be at its peak.

By Ezra Klein  |  April 13, 2010; 4:15 PM ET
Categories:  Economy , Interviews  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: McConnell's FinReg alternative
Next: Thomas Keller explains why it's hard to have a great restaurant in Abu Dhabi

Comments

First, it's not all that hard to provide the basic safety net of unemployment insurance, which not only helps victims but injects money into the economy. But they just voted to extend unemployment insurance for one month!


I agree with this wholeheartedly and realize its the Republicans that are stalling this. Having to do this every other month wastes valuable congressional time. Also if the Republicans wanted to use it as a political football for the upcoming elections they could say that we've had to continue unemployment benefits throughout 2010 due to the poor job on the economy done by the Democrats. Whether that's right or wrong could be up for debate but they would and could certainly say that.


Also at what point do those that are unemployed need to go through re-training efforts when they become employed again? Some sectors I would expect would be like riding a bicycle but others may not and there are costs to that too.

Posted by: visionbrkr | April 13, 2010 4:57 PM | Report abuse

Glad to read some serious examination of the current state of the ecomony as opposed to Ezra's politically driven over-optimism.

I understand how Ezra's overriding consideration is the political prospects of the Democratic party, but I do appreciate the serious analysis that sometime occures on this blog.

Posted by: lancediverson | April 13, 2010 5:54 PM | Report abuse

"Another is to provide relief to state and local governments. Their retrenchment this summer and fall will cost us roughly a million public and private sector jobs."

California and Oakland, where I live, are examples of the death by inches that's slowly killing off public services by putting public workers in the unemployment lines. State and local governments can't print money, only the feds can do that.

"Third, we should definitely be pursuing the bill introduced by George Miller to assist local governments and community-based organizations in the direct hiring of workers."

Yes! How bad does unemployment have to get before we're finally ready to begin a 21st century WPA?

"Fourth, we should not be dillydallying on transportation infrastructure and I think we could do a whole school modernization and rehab program this summer."

Yes! Rebuild roads, bridges and schools. And while we're at it, let's add bike/walking paths and parks.

"Fifth, we've already had a debate on a jobs tax credit, but what got passed, the Schumer-Hatch version, was a pretty misguided version."

Yes! The jobs tax credit is weak tea. We need a jolt of strong coffee — put people to work now. Even the Republicans ought to be able to get behind paying people to do work, rather than just paying them unemployment benefits.

Posted by: friscokid | April 13, 2010 6:36 PM | Report abuse

I don't understand why liberals such as this fellow and Robert Reich simply accept the outsourcing that has decimated our workforce, and will do vastly more damage over the next decade. Whose side are you on?

And why the silence about productivity statistics? It is well known now that productivity, as we measure it, soars when jobs are outsourced, because the cut in costs is measured, but the reduction in employment is not. High productivity is coming in large part from high outsourcing, and not from our own production and other efficiency improvements.

Posted by: mminka | April 13, 2010 7:37 PM | Report abuse

"If you believe as I do that a good economy is one where people see broad-based income growth,"

Then in that case, they should have declared a recession several years ago, since wages have been in decline for awhile.

Seems like the econ'ists are redefining the meaning of recession in order to save their cred's in case of a double-dip. If Bush were president now, have no doubt he'd be declaring "Mission Accomplished" right now.

Posted by: Lomillialor | April 13, 2010 10:42 PM | Report abuse

Here's the thing that's missing for me (and maybe it's actually discussed in here and I just don't get it): What exactly is the future of our economy? And I don't mean that in a "Is it going to be up or down?" way. I mean that in a "What should it look like? What should it be producing? What should wage distribution likely be on average?" kind of way.

Obviously, there are going to be the inevitable ups and downs, twist and turns, etc, etc. But if we really are trying to move away from a bubble and bust economy, shouldn't we be discussing (in real terms) exactly what that means long-term? And even if we have figured out what that means and I'm just not getting it, shouldn't we then be discussing all of the facets of how we're going to get there?

I understand that FinReg may be apart of achieving that clear economic vision that somebody somewhere may or may not have, but I, for one, might feel a little better about it if I grasped an overall plan. And yes, there's the whole "green energy economy" idea (which I'm totally on board with just based on principle), but that hardly seems like a complete solution to problems that have been ignored for years and years.

I don't know. Maybe I'm crazy. But it seems to me that just getting us out of our current fix isn't exactly tackling the deeper issue. And in my mind, the deeper issue is that our economy is, indeed, built on sand, and when erosion occurs, our response seems to be to simply add more sand....eventually.

Posted by: slag | April 13, 2010 11:57 PM | Report abuse

A growing class of permanently un/under employed will be source of great civil unrest. The ruling elites of either ilk should note this or not at their peril.

Posted by: BertEisenstein | April 14, 2010 9:31 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company