Sunday, September 15, 2013

Krugman: "The Employment Story is Highly Unimpressive:"

Even Paul Krugman gets it. He writes:
The measured unemployment rate is down a lot — in fact, at 7.3 percent it’s almost exactly the same as it was in November 1982 1984, when Ronald Reagan won big on claims of restored prosperity. But most of the fall in unemployment reflects lower labor force participation rather than job growth. Even if we focus on prime-age workers, so as to net out demographic effects, the employment story is highly unimpressive:

I believe Krugman is also correct about this:
The US economy in 2000 had really, really full employment — it was an era when labor was so scarce that McDonald’s was actively trying to recruit senior citizens, when the joke was that you could get a job as long as your breath would fog a mirror, that is, as long as you were actually alive. The peak in 2007 was nothing like that. So what looks like a secular downward trend may in large part reflect instead the extent to which the “Bush boom”, such as it was, fell far short of the Clinton boom.
Krugman fails, however, to mention the growing regulations and  demands on employers which make it much more costly to bring on new help. Instead, amazingly, Krugman does what he always does, he calls for more Fed money printing. But, note well. Krug is no longer warning about deflation, he now just says price inflation is "well below target.":
What I would say, however, is that the Fed needs to balance the risks here. Inflation is well below target — and there’s good reason to believe that the target is too low. There’s also good reason to believe that sustained high unemployment leaves lasting scars on the economy. Why not wait for clear evidence that the economy is really approaching capacity before doing anything that could be interpreted as tightening?
Krug may think price inflation is "well below" the Fed's stated target of 2.0%, but reality says different. The MIT billion prices indexes has price inflation already over 2.0%, not below.


  1. He only talks about subjects he can pretend he is right about, it seems.

    For example, I haven't seen him comment on Argentina since last year; I wouldn't expect him to acknowledge the MIT BPI unless it came closer to CPI and they were both under 2%.

    He plays a silly game but is really good at getting away with it; I don't know why.

    1. Argentina is doing great according to Krugman

  2. Is this the article he wrote where he bemoans that there aren't more people in the 1%? I love reading his blog and finding the plethora of logic errors he makes. I don't doubt he is a smart guy, but he seems oblivious to the fact that when you wrap economic thought with a political agenda as he does, the risk of being compelled to make illogical arguments dramatically increases.