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Tuesday, February 05, 2013

Why should the President give a rip about unemployment?

The electorate didn't.

Michael Darda, chief economist at MKM Partners, points out that “it will require a multiyear period of above-trend growth to return unemployment to more normal levels.” He speaks of the “jobs gap,” the difference between current employment levels and what they would be if a few years of catch-up economic growth had reestablished the pre-recession trend. Assuming annual private-sector employment growth of 2 percent, the average of the past three decades, we’re 14 million jobs short. And because catch-up growth never happened — say, a few years of averaging 5 percent growth, as happened after the 1981–82 recession — even if the economy returns to steady 3 percent growth, GDP levels will be trillions lower in the future than they would have been otherwise, due to the lower starting point.

But right now output growth and job growth aren’t even back to trend. And that means every month the output and jobs gaps grow a bit wider. With an economy that hasn’t hummed since the 1990s, we’ve already had one lost decade. If we begin to accept and acquiesce to the creeping new normalcy, America risks suffering its own lost generation. Someone right now needs to say “Enough” — and then back up those words with action. It would be helpful if that person were Obama.

It's what the majority wanted. The President will continue to blame everyone else while the corrosive effects of long-term unemployment, coupled with national insolvency, do the inevitable.


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