Tags: Yale | Shiller | Unemployment | jobs

Yale’s Shiller: 'Persistence of High Unemployment' Haunts US

Wednesday, 02 May 2012 07:59 AM

The United States isn’t in a depression but doggedly high unemployment rates and near zero interest rates make it feel that way, says Yale economist Robert Shiller.

"The persistence of high unemployment is a problem," Shiller tells CNBC, backtracking on comments made recently the world was in a "late Great Depression."

"Did I say that? Well, I think there are a lot of analogies to what we’ve been going through to that of the Great Depression, but I don’t really think we’re in a depression, so I might have said it slightly wrong,” Shiller tells CNBC’s “The Kudlow Report.”

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

Turning back to the U.S., while the economy may not be mired in depression, it's not really recovering either.

"In some ways, we are not in a recovery. Look at the employment-population ratio. It’s stuck at 58.5 percent. That’s kind of close to the lowest it’s been in this whole debacle," Shiller says.

"We haven’t recovered jobs. Unemployment rate is down, but that is because people have left the labor force."

The unemployment rate stands at 8.2 percent, although Shiller and other economists widely point out the figure would be much higher if discouraged workers were factored into the equation.

The unemployment rate measures the percentage of those in the labor force who are out of work, although jobless workers who quit actively searching for work aren't counted as part of the labor force.

Factor them back in and the percentage rate would jump.

The Federal Reserve has propped up the economy to ensure unemployment rates remain as low as possible by cutting interest rates and through stimulus policy tools like quantitative easing, where the Fed buys bonds from banks, injecting them with liquidity with the aim of encouraging investment and hiring.

The Fed has rolled out two rounds of quantitative easing since the downturn, and talk of a third round is fading away as despite spotty economic indicators, the overall trend points to an economy that can stand on its own two feet.

"For us to provide more monetary stimulus at this point would likely raise inflation risks and not likely do much for growth,” says Federal Reserve Bank of Richmond President Jeffrey Lacker, according to Bloomberg.

While "it’s not a gangbusters recovery by historical standards,” growth will accelerate, Lacker adds.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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