There are not enough thumbs-up graphics on the internet to show how much I agree with and how important I think this Paul Krugman blog post is. He goes through all of the obvious indicators signaling that the economy is far from healed from the Great Recession, as well as all of the puzzling ways policymakers seem determined to ignore this, and ends with:
“I guess what I’m saying is that I worry that a more or less permanent depression could end up simply becoming accepted as the way things are, that we could suffer endless, gratuitous suffering, yet the political and policy elite would feel no need to change its ways.”
We said much the same thing in the introductory chapter to State of Working America, 12th Edition published last Labor Day:
“We should be very clear about the danger of this complacency in the face of elevated unemployment. It’s not simply that full recovery to pre-recession health will come too slowly—though this delay alone does indeed inflict a considerable cost. Instead, the danger is that full recovery does not come at all. Nations have thrown away decades of growth because policymakers failed to ensure complete recovery. Japan has been forfeiting potential output—trillions of dollars’ worth, cumulatively—for most of the past 20 years. Recent research (Schettkat and Sun 2008) has suggested that the German economy operated below potential in 23 of 30 years between 1973 and 2002 because monetary policymakers were excessively inflation-averse. Lastly, U.S. economic history provides the exemplar of what can happen to a depressed economy when policymakers fail to respond correctly: The level of industrial production in the United States was the same in 1940 as it was 11 years before.”
And today’s jobs-numbers, while a nice mild boost above recent trends, really don’t change this assessment at all.