The Jobs Question

This is by far the most jobless of recent recoveries. Allen Sinai, a man known for describing numbers carefully, already wrote in November 2009:

“Never has business shed so many workers so fast, so many people failed to find work who are looking for work, and so many dropped out of the labor force as in the current circumstance.”

By that time, the stock market was already recovering but payrolls were not. Sinai wrote:

“...it should be no surprise to see “Wall St.” do better than “Main St.” in the beginning stages of an upturn. This phenomenon is not new... But, at the moment, the juxtaposition of the extraordinary run-up of the U.S. stock market against the extraordinary weakness of the labor market presents an unusual picture of extreme ‘disconnect.’”

As for what would happen next, Sinai thought that the ARRA and “quantitative easing” together foreshadowed:

“sustainability for the recovery in real GDP terms and continuing expansion, at least through 2010 and into 2011. But beyond 2011, when the effects of the fiscal stimulus fade and the easy monetary policy is being withdrawn, sustainability will be in doubt.”

So here we are.  And here we sit.  The jobs question entails two related but separate issues.  The first is whether economic growth will continue.  The second is whether, even if it does, new jobs will be created sufficient to restore high employment within any reasonable time.

Read the full paper here.