The U.S. has two economies, says Nouriel Roubini, professor of economics at New York University's Stern School of Business and chairman of RGE Monitor.
"There is a smaller one that is slowly recovering and a larger one that is still in a deep and persistent downturn," Roubini writes.
Roubini notes that while America's official unemployment rate is 10.2 per cent, the figure jumps to a whopping 17.5 per cent when discouraged workers and partially employed workers are included.
And, while data from firms suggest that job losses in the past three months were about 600,000, household surveys, which include self-employed workers and small entrepreneurs, suggest a number above two million.
“Many of the lost jobs — in construction, finance, and outsourced manufacturing and services — are gone forever, and recent studies suggest that a quarter of U.S. jobs can be fully outsourced over time to other countries,” Roubini says.
Credit markets are another indicator of his two-economy analogy, Roubini says.
“Prime borrowers with good credit scores and investment-grade firms are not experiencing a credit crunch at this point,” he points out.
“Non-prime borrowers – about one-third of U.S. households – do not have much access to mortgages and credit cards and live from paycheck to paycheck,” Roubini notes. “And the credit crunch for non-investment-grade firms and smaller firms, which rely mostly on access to bank loans rather than capital markets, is still severe.”
There are six times as many Americans seeking work as there are job openings, says Nobel prize-winning economist Paul Krugman.
“… the average duration of unemployment — the time the average job-seeker has spent looking for work — is more than six months, the highest level since the 1930s,” Krugman writes in The New York Times.
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