The Progress is Real

Paul Krugman has another post arguing that, contrary to Romney’s assertions, “the progress is real”:

The Payroll Data: Another quick note, this time on what the payroll data say. Again, you want to focus on somewhat longer-term trends, not monthly numbers. Over the past year the employer survey says that we’ve added 1.8 million jobs, or 150,000 a month … And this number is likely to be revised up.

This is substantially more than the number of jobs we need to keep up with population growth, which is currently something like 90,000 a month. …

So the two survey are saying the same thing: job growth fast enough to make gradual progress on the employment front. Not fast enough; it will take years to restore full employment, and we should, um, end this depression now. But the progress is real.

I think the 90,000 estimate is a bit low, 125,000 is probably closer (e.g. see here). So while I agree we are making progress, I also agree it’s far too slow — perhaps even slower than Krugman’s estimates. The question is why, and two answers come to mind. First, as Krugman explains here, recoveries from financial crashes tend to take awhile:

However, as he also explains, this is far from the slowest recovery we’ve seen — “it’s way better than Bush’s recovery.” We started with a huge problem, the initial stimulus along with the efforts at the Fed stopped it from being an even bigger problem — the no-stimulus at all outcome would have been far worse — but more needed to be done.

That brings up the second point. Republicans in Congress have blocked efforts to implement fiscal policy measures over and above the initial stimulus effort (and they would have blocked the Fed as well if they had the power to do so). An aggressive infrastructure construction effort would, for example, buttress monetary policy and speed the recovery, and it would also provide benefits (including higher future growth) that exceed costs, but Republicans are not going to let that happen. This is like hiding half of the medicine a patient needs for recovery based upon medical quackery, and then asking why the doctor is doing such a lousy job.

About Mark Thoma 243 Articles

Affiliation: University of Oregon

Mark Thoma is a member of the Economics Department at the University of Oregon. He joined the UO faculty in 1987 and served as head of the Economics Department for five years. His research examines the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables with a focus on asymmetries in the response of these variables to policy changes, and on changes in the relationship between policy and the economy over time. He has also conducted research in other areas such as the relationship between the political party in power, and macroeconomic outcomes and using macroeconomic tools to predict transportation flows. He received his doctorate from Washington State University.

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