Is Unemployment a Relic?

A new study asserts that the recession had little influence on the rise in unemployment.

New York Times: “The study, by two economists at the Federal Reserve Bank of New York, asserts that workforce participation is in long-term decline. If the recession had never happened, or the economy had since returned to complete health, the authors estimate 59.3 percent of adults would have jobs, instead of 58.6 percent.”

“As the baby boom ages into retirement, the authors argue that fewer people want those jobs. The problem of unemployment is evaporating right before our eyes.”

“This assertion has large consequences. It suggests that the rapid fall in the unemployment rate, which reached 6.7 percent in December, is an accurate measure of a labor market that is almost done healing. It follows that the Fed’s stimulus campaign has nearly served its purpose, that it is time to retreat, perhaps even more quickly, and that some Fed officials are right to worry about doing too much.”

Source: Current Population Survey.

The implication is that, in effect, there were too many jobs before the recession – that the labor market was overheating – and, as a result, that some of the recent losses should be seen as a return to health.

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