Counterparties: The slow-burn jobs crisis
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Today’s jobs report was decidedly bad: The US added just 69,000 jobs in May, leaving unemployment unchanged at 8.2% and employment gains in both March and April revised down. The ranks of the long-term unemployed, those without a job for 27 weeks or more, swelled by 300,000.
Justin Wolfers is convinced that economic conditions demand fiscal stimulus. And although Treasury yields are once again a fear gauge, Felix thinks they also show us the way out: vast government borrowing at cheap rates and spending to invest in infrastructure, public-sector employment and the social safety net.
But congressional intransigience and the president’s seeming discomfort with stimulus makes that an unlikely path. Betsey Stevenson calls on Congress to “stop acting like children and do something about the fiscal cliff and debt ceiling” rather than engage in seven months of brinkmanship. But Jared Bernstein, Joe Biden’s former economic adviser, doesn’t think that a Congress committed to acting on narrow, partisan terms “regardless of the degree of hardship in the current economy” can mature on a whim. After all, the benefits of the president’s jobs bill are looking awfully attractive right now, and it was pronounced DOA.
Binyamin Appelbaum thinks the most likely source of economic juice will come from the Fed. Ryan Avent agrees that the Fed will be forced to consider action, but thinks it’s unlikely to be decisive enough:
The Fed bears the greatest responsibility for America’s pathetic recovery…The Fed’s interventions have been limited and seemingly designed to ignore the powerful expectations channel; at no point have breakevens shown inflation expectations steady at even pre-crisis levels when expectations above pre-crisis levels are what the current situation demands…It repeatedly stops pushing the economy forward as soon as it seems likely that the economic trajectory will carry inflation toward 2%.
Tim Duy feels like he’s already seen this movie in the summer of 2011. If that’s true, it will be deeply unfortunate, because after a month when the economy added too few jobs for at least one economic-recovery model to even compute, waiting to act is increasingly counterproductive. – Ben Walsh
On to today’s links:
Man with power to do something about the euro crisis urges others to do something about the euro crisis – NYT
What do you do when half of your country’s youth is unemployed? – TNR
Investors are paying Germany to watch their money for a couple of years – WSJ
Everyone stop being so “dangerously facile” about deficits and growth – Ken Rogoff
Are we seeing a capital flight from China? – Tim Duy
A detailed case for “monetary regime change – National Review