Tags: Stiglitz | Labor | Market | jobs

Joseph Stiglitz: Labor Market in Desperate Need of Help

Wednesday, 14 March 2012 08:09 AM

Economist Joseph Stiglitz says the labor market is still a mess and the economy will almost certainly need more stimulus if it is to return to full employment any time soon.

"There are still 23 million Americans who would like a full-time job but who cannot get one," Stiglitz writes in the Financial Times. "The jobs deficit, the number of extra jobs that would have been required to keep up with new entrants to the labor market, is 15 million."

Employment has yet to return to its level of December 2008, notes Stiglitz, and male employment is still below what it was in February 2007. Meanwhile, the working-age population has grown considerably.

Editor's Note: Meltdown on Main Street Coming, Prepare Now

“Let’s assume that job creation continues at the rate of 225,000 jobs a month,” says Stiglitz. “That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labor force,” he said.

“At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025.”

The independent Congressional Budget Office is more optimistic, notes Stiglitz, forecasting the return of full employment by 2018.

“We might, once deleveraging is finished, return to 'normal' growth rates; but what is required to get unemployment down is an extended period of above normal growth,” notes Stiglitz, and that’s going to require more economic stimulus.

Unfortunately, says Stiglitz, little has been done about the underlying structural problems. Indeed, the downturn, during which wages have not kept pace with inflation, has in many ways made U.S. inequality worse.

Stiglitz believes the American economy faces three big risks: A steeper European downturn, as a result of the excessive austerity and the euro crisis, complacency that the economy will recover quickly without government support, and our acceptance that an unemployment rate above 7 percent is inevitable.

“If my Cassandra forecast turns out to be wrong, stimulus can be cut,” says Stiglitz. “But if it turns out to be right, and we do too little, we will live to regret it.”

Bloomberg reports that the Conference Board’s Employment Trends Index, a measure of job prospects in the U.S., rose in February to the highest level in more than three years.

Editor's Note: Meltdown on Main Street Coming, Prepare Now

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