Collective Conscious

Here’s Paul Krug­man yes­ter­day, throw­ing a wet blan­ket on last week’s report that unem­ploy­ment is falling:

Even if we add 300,000 jobs a month, we’re look­ing at a pro­longed period of suf­fer­ing — a huge cost from the Great Reces­sion. So that’s kind of a min­i­mal def­i­n­i­tion of suc­cess. Any­thing less than that, and it’s bad news. It sort of puts that won­der­ful report that we only lost 11,000 jobs in per­spec­tive, doesn’t it?

And here’s Mark Thoma, a month ago, on why we should nei­ther expect nor desire that much growth:

Exactly how much [nor­mal unem­ploy­ment] will rise and for how long is hard to say. A 5 or 6 per­cent rate, or even some­what higher is cer­tainly imag­in­able, but get­ting it right is impor­tant. If pol­i­cy­mak­ers tar­get an unem­ploy­ment rate that is too low, they risk caus­ing infla­tion (one rea­son for the high rate of infla­tion in the 1970s is that the Fed tar­geted a 4 per­cent unem­ploy­ment rate when the actual rate of nor­mal unem­ploy­ment was much higher due to struc­tural and demo­graphic change).

So let’s use these num­bers in Krugman’s analy­sis. Rather than aim­ing to com­pletely fill the unem­ploy­ment hole and cre­ate 18 mil­lion jobs over 5 years, a 6-​​ish per­cent “nor­mal” unem­ploy­ment would imply that 15 or 16 mil­lion jobs would need to be cre­ated in 5 years, rather than 18. Not much bet­ter, but it shaves off as much as 50,000 jobs per month. And if we tar­get 10 years rather than 5, then as few as 180,000 jobs per month, on aver­age, will do. Over ten years, we’re much more likely to see the boom times that would make up that dif­fer­en­tial. From that per­spec­tive, we’re much closer to a real turn­around than Krug­man and the EPI make it seem.