Felix Salmon

The tragedy of long term unemployment

Felix Salmon
Apr 23, 2013 00:39 UTC

Paul Krugman and Megan McArdle both point to this chart today:

What you’re looking at here is the plight of the long term unemployed in the wake of the Great Recession. If you look at the economy before the recession (the blue line), it works pretty much as you think it would: as the number of job openings goes up, the long term unemployment rate goes down. But then the crisis happened, and now we’re in a Bizarro world where the long term unemployment rate goes up even as the number of job openings increases.

It’s worth looking at this chart in the context of one which might be more familiar:

What you’re looking at here is initial claims for unemployment (the blue line) and the unemployment rate (the red line); both are rebased to 100 at the end of 2007. You can see that initial claims have historically been a very good leading indicator when it comes to the unemployment rate. And that’s perfectly intuitive: if the number of people newly claiming unemployment each week is going down, you’d expect the overall unemployment rate to follow.

But there’s something worrying about this chart: although the unemployment rate is indeed coming down, it’s not coming down as fast as you’d expect it to, given the sharp drop in initial unemployment claims. In other words, people aren’t becoming newly unemployed, but the unemployment rate is still staying stubbornly high. Which is another way of saying that this time around, the long-term unemployed are finding it particularly difficult to get back to work.

I decided to put together the exact same chart, only instead of using the overall unemployment rate, I’d look at just the long-term unemployment rate — the proportion of people who have been unemployed for more than 27 weeks. This is what I found:

The blue line, in this chart, is exactly the same as the blue line in the chart above it. But the red line is long term unemployment — which is at massively unprecedented levels.

This chart tells me two things. Firstly, it is indeed the long-term unemployed who are the reason why the unemployment rate overall isn’t coming down as fast as it should be. And more importantly, there’s a quiet humanitarian disaster happening right under our noses. Here’s McArdle:

Short of death or a debilitating terminal disease, long-term unemployment is about the worst thing that can happen to you in the modern world.  It’s economically awful, socially terrible, and a horrifying blow to your self-esteem and happiness.  It cuts you off from the mass of your peers and puts stress on your family, making it likely that further awful things, like divorce or suicide, will be in your near future.

McArdle and Krugman differ on the policies that should be enacted to address this emergency — but they agree that policies should be enacted to address this emergency, with urgency. That’s where they both part ways with Congress, which is much more interested in deficit reduction than it is in trying to make a dent in the long term unemployment rate.

The lesson of the past few years is that this is not a normal recovery: corporate profits are doing great, while total employment remains anemic. We can’t trust the invisible hand to generate the millions of jobs that are needed, especially with regards to the long-term unemployed. With gridlock in Washington, the result is a huge amount of unnecessary human misery.


At least the construction industry was mentioned in your discussion. For California, the recession fights on. In construction you would think that 35 years in business matters but alas, the bottom line is price over quality. No matter if they can barelyy speak english or wether they have a license or not. The bottom line is price. The license board is so busy budting non licensed illegals, they can’t keep up.

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The stagnation behind the excellent jobs report

Felix Salmon
Mar 8, 2013 15:49 UTC

Today’s jobs report is an unambiguously positive one: America had 236,000 more jobs in February than it had in January, and the unemployment rate is down to 7.7%, the lowest it’s been since 2008, before Barack Obama was even sworn in. (Although, it’s still nowhere near the 6.5% at which the Fed will start thinking about tightening monetary policy.) Things are getting better, US fiscal policy notwithstanding, and it’s great to see construction in particular, especially non-residential construction, finally making a substantial positive contribution to the numbers.

All is not entirely sweetness and light, though, as Brad DeLong and many others have noted. The number of multiple jobholders rose by 340,000 this month, to 7.26 million — a rise larger than the headline rise in payrolls. Which means that one way of looking at this report is to say that all of the new jobs created were second or third jobs, going to people who were already employed elsewhere. Meanwhile, the number of people unemployed for six months or longer went up by 89,000 people this month, to 4.8 million, and the average duration of unemployment also rose, to 36.9 weeks from 35.3 weeks.

In terms of the economy, it’s not good enough to simply increase employment and decrease unemployment, if the proportion of people with jobs isn’t actually going up. Which is why this chart, from Calculated Risk, is the most important one to look at right now:

Both the employment-to-population ratio ad the labor force participation rate are much lower than they ought to be: if this is a recovery, the former in particular ought to be going up, rather than going nowhere. Yes, it’s important to ensure that the unemployed get jobs. But in many ways it’s even more important to try to create jobs for people who simply aren’t working, rather than just for the people who are actively looking for work.

To turn these ratios into hard numbers: there are 89.3 million Americans who are not in the labor force, of whom just 6.8 million currently want a job. The economy ought to be able to find good, rewarding jobs not only for the 6.8 million, but for a large chunk of the other 82.5 million as well. Just imagine what that would do for tax revenues: all our fiscal problems would be solved at a stroke!


“The economy ought to be able to find good, rewarding jobs not only for the 6.8 million, but for a large chunk of the other 82.5 million as well. ”

You going to conscript these people into work camps? Beat them if they don’t perform? Let those who won’t work starve? That is what it might take. In all honesty some good portion of them cannot find jobs because their production under normal conditions and motivation is insufficient to offset the cost to their employers.

Sally no math skills and bad attitude and attendance problems might only be able to produce a few dollars an hour of value in most jobs. Well when she costs at minimum something around $10/hr, well it is going to be hard to employ her. Now the prospect of starvation might motivate her to improve herself, but that isn’t on the table in our society.

Certainly we need a more liquid labor market that more quickly and easily redistributes labor among people as demand for labor rises and falls. But retraining and more importantly solid education and job skills (being polite, showing up on time, not telling your jerk boss to screw) are a huge portion of that.

Unfortunately, many people are too far gone and have too little value combined with too high working condition sand wage expectations. That isn’t a quick or easy thing to fix short of forcibly demanding they work for their government assistance at the point of a gun. Certainly we as a society have demonstrated our inability to countenance people starving in the streets, so turning off the government assistance isn’t an option.

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The inherently complex payrolls report

Felix Salmon
Feb 1, 2013 15:35 UTC

This month’s payrolls report is one only a statistician could love. The official press release contains three whole pages on the subject of revisions and rebenchmarking, on top of the box on the front page: the very clear message is that we’re starting a new year, and that it’s a very bad idea to compare the January numbers to the December numbers.

That said, no one would have been particularly surprised by these numbers even if they were directly comparable: they’re basically exactly in line with what we’ve been seeing for months. Payrolls growth is constant, unemployment is flat: nothing’s getting better, nothing’s getting worse. And if you exclude some of the more volatile categories, that trend is even stronger. The good news in the report is about levels rather than changes: the total number of Americans on payrolls is now 134,825,000, while last month we were told that it was just 134,021,000. That means the number of Americans with a job is 800,000 higher than we thought last month, even if the unemployment rate, at 7.9%, is no closer than it was in September to the Fed’s 6.5% target.

Frankly, the payrolls report should be of interest mostly to statisticians and econometricians. The error bar for the number of jobs added is large, but the amount of data in there is enormous: the jobs report is an amazingly useful resource for people who want to study the state of the US economy over time. The problem is that it’s also the earliest indication that the markets get of how the economy is doing each month, and as a result it moves markets more than any other scheduled data release in the world, with the possible exception of FOMC announcements. In our short-attention-span world, where anything that moves markets must be news, it’s far too easy to get distracted by monthly noise — especially when people like me feel the need to weigh in every month.

The fact is that the jobs report is a sprawling, messy thing at the best of times, and it’s especially so this month. We only ever find out with hindsight whether the immediate market reaction was rational or silly, and the same goes in spades for the flurry of activity that greets the report on Twitter every month. Even the unemployment rate, which is now being explicitly targeted by the Fed, isn’t crucially important: Ben Bernanke has made it very clear that he’s going to take a big-picture view of the employment situation to determine when it’s time to raise interest rates, rather than just target the U3 rate narrowly, with no attention paid to things like the workforce participation rate.

To be honest, this month’s payrolls report probably isn’t even the most important data release of the day, let alone the month: the data from the manufacturing sector of the US economy is much less ambiguous, with the ISM report coming in strong and GM sales looking impressive. It’s an open question, of course, as to whether and how industrial strength is going to make its way through into full employment. But don’t look to the headlines atop this month’s payrolls report for answers. If they’re in there at all, they’re deeply buried, and not easy to find.

The employment emergency is over

Felix Salmon
Dec 7, 2012 15:41 UTC


This is the US unemployment rate, from Calculated Risk. Today’s jobs report was a very positive one: not only did job creation exceed all expectations, but unemployment fell too, to 7.7%. For the first time, the unemployment rate is lower than it was when Barack Obama took office, in January 2009.

The employment recovery is now 33 months old, and as strong as it’s ever been. We’re still a long way from achieving pre-recession levels of employment, but the fact is that it’s hard to maintain a sense of crisis and emergency for this much time: if you live with anything for more than a couple of years it becomes normal. (Which is one reason why Europe, which has a structurally much higher unemployment rate than the US, doesn’t consider itself to be in a permanent jobs crisis.)

The levels in the employment report are still scary. 7.7% is high in absolute terms, and both the employment-to-population ratio and the labor force participation rate are much lower than they should be. America should have millions more people at work than it does, and there’s a very strong case, looking at levels alone, for further economic stimulus to help us further in the right direction.

But there’s something oxymoronic about the concept of a permanent state of emergency. And in terms of how strong the recovery feels, first derivatives are just as important as levels: if unemployment has fallen from 8.7% to 7.7% in the past year, that feels better than an economy where unemployment has risen from, say, 6.1% to 7.1%. When the temporary payroll tax cut was passed, unemployment was higher than it is now, and it was rising; clearly we’re in a much better spot now than we were then.

The best-case outcome from the fiscal negotiations now taking place between Barack Obama and John Boehner is that they move us out of the “permanent temporary” tax code and into a world where everybody knows what tax rates are and what they will be. Putting expiry dates on tax cuts is a gimmick, and while there’s a case for doing that kind of thing in the middle of a major crisis, we’re really not in the middle of a major crisis any more. It took far too long for the unemployment rate to start falling, and it has been falling far too slowly. But “unemployment should be falling faster” is not a crisis.

With any luck, then, the resolution to the fiscal-cliff debate will be a set of tax policies that both sides agree on, along with a clear date when they will be fully in force. I’m thinking January 1, 2014. The key number to look at will be total federal taxes as a percentage of GDP: it needs to be high enough to be able to run a mature modern democracy. Then, once you have a clear and permanent tax code as your primed canvas, you can start having a sensible conversation about government expenditures: where they need to come down, and which areas of the economy need some stimulus. Even if spending-related stimulus is no more effective than tax-cut-related stimulus, it’s still a better option, because it allows you to leave the tax code alone.

If Obama’s first term was about doing whatever was necessary to get us out of the biggest crisis in living memory, his second term should be dedicated to building strong and permanent foundations for the economy going forward. America’s fiscal architecture is a key part of that — indeed, it’s the key part. So if the payroll cut disappears, along with all other temporary bells and whistles, that’s fine. What’s good for the economy now will also be good for the economy next year, and the year after, and the year after that. Let’s structure any a deal so that it can work forever. And then, if there are temporary political and economic issues which need addressing, let’s tackle them through means other than the tax code.


Please, sir – send me a pair of the rose-colored glasses you are wearing. The ACTUAL unemployment rate when factoring in the under-employed and those who have stopped looking for work is about 14%.

Recovery? Most of the jobs now touted are part-time or temporary or seasonal, minimum wage with no benefits. The employment always is greater during the holidary season when stores need more employees – TEMPORARY employees who will not be kept on after the holidays.

It is a “wait and see” time – when you wait and see what the numbers will be in January, February and March. Plus, more companies are cutting hours for employees – even Walmart is doing this. Not pessimistic – just realistic in my views of the “wonderful” employment numbers.

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The problem with the return of manufacturing

Felix Salmon
Nov 30, 2012 00:01 UTC

Charles Fishman has an upbeat cover story in the new Atlantic, talking about how manufacturing is making its way back from China to America. As the world demands an ever-more nimble manufacturing sector, able to produce smaller quantities of goods more quickly, it makes sense to make those goods here rather than be forced to spend a month shipping them over from China, especially with shipping costs rising. On top of that, Chinese manufacturing costs are rising too: inputs from labor to natural gas are getting much more expensive. (Natural gas costs four times as much in China as in the U.S., while James Fallows reports that a typical Foxconn salary is now $400 a month, three times what it was six years ago.)

Fishman’s enthusiasm for bringing the designers closer to the means of production — it really does make for much more efficient assembly lines — means that he papers over the reality of what America’s new manufacturing-sector workers are being paid:

Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.

There’s a huge difference between $13.50 per hour and $21 per hour: the latter is something you can actually live on, something you can consider to be a career. The former is not. And that’s a problem, as Adam Davidson explains: the reason that people aren’t going to college to learn the skills needed on a modern manufacturing assembly line is simply that those skills aren’t valued highly enough. Even McDonald’s, where there were noisy strikes today, looks attractive in comparison:

Isbister doesn’t abide by strict work rules and $30-an-hour salaries. At GenMet, the starting pay is $10 an hour. Those with an associate degree can make $15, which can rise to $18 an hour after several years of good performance. From what I understand, a new shift manager at a nearby McDonald’s can earn around $14 an hour.

What we’re seeing here is the same thing that Seth Ackerman saw at Hostess: wages that are so low, the workers prefer to give up the work entirely, and take a better-paying job elsewhere.

In a piece for Salon, Jake Blumgart quoted a bakery worker who had been at the company for 14 years. “In 2005, before concessions I made $48,000, last year I made $34,000…. I would make $25,000 in five years if I took their offer. It will be hard to replace the job I had, but it will be easy to replace the job they were trying to give me.”

What we have here is a situation where a company offered a wage in the marketplace and couldn’t get any workers to accept it. Consequently, it went out of business. The word “competitive” gets thrown around a lot, often with the murkiest of meanings, but in this case there can be no doubt at all that a company, Hostess, was unable to pay a competitive wage. Ninety-two percent of its workers voted to walk out on their jobs rather than accept its wage, and they stayed out even after they were told it was the company’s final offer.

All of which means that there are two enormous problems with the story that manufacturing is returning to the US. That might be true, but (a) it’s not creating many jobs, and (b) the jobs it is creating are not the good jobs which people want to have for many years. Instead, they pay $15ish per hour, which is what teenage babysitters make in New York.

Once upon a time, in the halcyon 1950s and 1960s, a man could have a blue-collar factory job and make enough money to support a whole family. Those days are over now, but they echo still in the dreams of manufacturing returning to the U.S. The idea is that were that to happen, good jobs would magically be created. Where the reality is that manufacturing jobs are not good jobs any more: you’re better off working in retail, whether you’re in the US or in China. And you don’t need to spend unpaid years in college learning technical skills to get a retail job.

So while I’m as excited about the Internet of Things as the next guy, and I love any economy where ideas can become products with unprecedented ease, I don’t think that this is a particularly good solution to the unemployment problem. It’s better than nothing, of course. But I do get worried when The Atlantic splashes the word “COMEBACK” all over its cover: that makes this phenomenon seem much happier than in truth it is.



The dirty little secret you never see referred to is that in unionized US plants workers are actually working only 5 or 6 hours out of 8 (based on 30 years of consulting and exposure to over a thousand plants here and abroad.

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Chart of the day, employment edition

Felix Salmon
Nov 2, 2012 14:09 UTC


There’s lots of good news in today’s employment report: payrolls rose substantially in October, and the already-great numbers for August and September were revised upwards to boot. Even the uptick in the unemployment rate, from 7.8% to 7.9%, was actually positive in many ways. Americans are back looking for work, which bodes well for the next few months.

And then there’s the technocratic good news, too: the BLS isn’t just releasing numbers any more, it’s also releasing charts! Along with the standard payrolls press release this morning, there was also a PDF file which included the chart above.

This chart I think tells the big-picture story very well. Firstly, jobs aren’t political, they’re economic. They rise when the economy is doing well, and fall during recessions: the name or party of the president can only affect things at the margin.

Secondly, we’re still in very bad shape, employment-wise: there’s a long way to go before we get back to where we were before the crisis. And that’s in absolute terms: remember that the US population has been growing all along.

And thirdly, in case you needed any reminder, this recovery is long and painful. Look at the rate of employment growth from 2002 to 2006, and extrapolate it upwards to get an idea of what the capacity of the US economy is: where we could be, if we hadn’t been hit by the crisis. Then, look at the gradient of the current recovery: it’s not noticeably steeper than the trend-growth gradient. Which means, to a first approximation, that we’re just as far below capacity as we were when the recession ended.

This isn’t entirely bad news. For one thing, the recession has ended, thanks in no small part to the 2009 stimulus and to the unprecedented monetary operations being carried out by the Fed. And compared to, say, any country in Europe, the strength of the US recovery is decidedly impressive. But if you aspire to full employment — and that is one of the Fed’s two mandates, after all — then in one sense we’re just as far away from that goal as we were two years ago.

Markets and economists will and should react positively to today’s report, which is significantly better than most of us expected. But it doesn’t change the fact that the biggest problem facing the US economy is unemployment and underemployment. We need to get the unemployed and underemployed working again, and the longer it takes to do that, the harder the job becomes, given the well-documented ways in which long-term unemployment erodes skills and morale.

How much can politicians really do, on that front? I don’t know. But a front-loaded fiscal employment push would be great right about now, while massive spending cuts are precisely the opposite of what we need. And in a country where millions daily face the misery of being unable to find work, it would really be unconscionable to vote for anybody who thinks it would be a good idea to cut food stamps by $134 billion.

Every little vertical notch on that BLS chart represents 2 million employed Americans. We all want to see the lines go up and to the right, so that millions more Americans get jobs. But we also need to keep in mind just how depressed those lines are. The number of Americans without work is absolutely enormous right now. And so while we’re trying to create new jobs, it’s even more important that we ensure the well-being of those who don’t have employment yet.


Auros, that wasn’t what he was saying though.

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The electoral politics of the jobs report

Felix Salmon
Oct 5, 2012 15:19 UTC

Last month, I wrote a bit about what you might call the bidirectional causality between the unemployment rate and incumbent political fortunes. On the one hand, unemployment affects happiness, and willingness to vote for the current president. But on the other hand, the rate itself is a political weapon, to be used in, for instance, Republican claims of how many successive months America has had unemployment above 8%.

This morning’s job report is fascinating, in that it illuminates both effects. One not-bad way of judging Obama’s odds of winning the election is to look at his odds on InTrade, which were stubbornly close to 60% for pretty much all of this year. Then, suddenly, in mid September, there was a huge surge. Narrowly speaking, the surge was a result of Obama doing well in important polls. But why were the polls suddenly turning so much in Obama’s favor? Journalists, with their bias towards believing that everything is a result of news, tended to attribute Obama’s newfound popularity to Romney gaffes like his 47% speech. But with hindsight, maybe news had very little to do with it. Maybe the real reason was that according to the household survey, the number of employed Americans grew by 873,000 in September alone.

Which isn’t to say that news is irrelevant when it comes to perceived election odds. For instance, within the first half-hour of the debate on Wednesday, Obama’s InTrade odds fell from 71% to 67%, just on the back of his weak performance. And then, this morning, they spiked right back up again, from 65% to 71%.

This move is about optics as much as it is about reality: with the unemployment rate now below 8%, a key Republican talking point has been neutralized. And for the wonkier types, Obama can now say that he’s created more private-sector jobs in the past four years than George W Bush created in eight. Indeed, if it weren’t for public-sector job losses — exactly the kind of spending cuts that Republicans claim to love — the unemployment rate right now would have a 6 handle.

Those optics explain the frantic and ignoble conspiracy theories from the Republican side: they’re trying to alter perceptions of the number itself, even if they can’t alter the effect that rising employment has on the electorate’s propensity to vote for Obama. Because it seems as though rising employment is giving a significant boost to Obama’s re-election chances — and that from here on in, it will only be helped by the 7.8% headline unemployment rate. It’s a little bit depressing that 7.8% counts as low, for these purposes, but clearly it does — especially considering that it has come down 1.2 percentage points in the past year. I don’t know how much credit Obama can really take for that, but America, right now, seems to be willing to give him the benefit of the doubt.


I love the way the Republicans ran the economy into the ground under George Bush II and then blame the firemen who came along to stop the fire spreading and say it’s the firemen’s fault the workers can’t work in the building any more…

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Job creation: Where are the startups?

Felix Salmon
Sep 13, 2012 20:27 UTC

Tim Kane, at the Hudson Institute, has a new paper out with a simple title: “The Collapse of Startups in Job Creation”. His paper is basically a slightly politicized version of the charts put out by the Bureau of Labor Statistics last month, under the headline “Entrepreneurship and the U.S. Economy”. The first two charts are particularly striking. The first one looks at the number of startups in America — companies less than one year old.


This shows a reasonably steady rise in entrepreneurship from 1994 to 2006, then a collapse as the housing bubble bursts, and — most worryingly of all — no recovery at all after the recession ends. Instead, we have significantly fewer startups right now than we did even at the depths of the recession.

If you look at the number of jobs at these startups, rather than the number of startups, the picture is equally bad, although the decline is older. This series peaked back in 2000, and has been declining ever since:


This doesn’t make a lot of intuitive sense. As Kane writes,

Economic theory suggests that the modern economy offers a better environment for even more entrepreneurship. First, there is a wider technology frontier to explore. Second, a wealthier society enables more individuals to explore rather than merely work to survive. Third, the shift to services requires less startup capital than manufacturing or agriculture. In other words, the downward trend in the rate of entrepreneurship should, in theory, have rebounded by now.

Kane thinks that it’s something to do with taxes and regulations; I don’t buy it. But he also has a globalization argument:

An American entrepreneur has zero tax or regulatory burden when hiring a consultant/contractor who resides abroad. But that same employer is subject to paperwork, taxation, and possible IRS harassment if employing U.S.-based contractors.

Are jobs at US startups effectively being offshored? I don’t know. But I do know that small business is where the jobs are, in this economy. Here’s the chart:


The green line, at the top, is the number of jobs at small businesses, with less than 50 employees. The red line, underneath it, is the number of jobs at medium-sized businesses, with somewhere between 50 and 500 employees. And the steadily-declining blue line, at the bottom, is the number of jobs at large businesses with more than 500 employees. Clearly, if we want to boost job creation, the best place to look is not the blue line but the green line. And equally clearly there has been an increase in the number of jobs at small firms overall, since the recession ended.

So if small firms in general are hiring again, what’s the problem with startups? Kane has run the numbers back to 1989, to come up with this chart:


There’s really nothing predictable about the dismal showing in the last three years of this chart — and especially not in the last two years, when we’ve had a recovery accompanied by record-low interest rates.

Admittedly, all of these numbers are low: at their peak, startups employed only a little more than 1% of the population, and now they employ a little less than 1% of the population. Concentrating on startups is not going to move the broader employment needle very much. But the dynamic here is surprising and troubling, all the same. Intuitively, if people can’t find work for an existing company, they should be more likely, not less likely, to go out and found a new company themselves, instead. But that doesn’t seem to be happening.

The only thing I can think of here is that for all that we think of startups as being largely high-tech things, in reality a huge number of them are in the construction industry, in one way or another. In a word, subcontractors. And no one’s starting new granite-countertop installation companies right now. But still, startups are a decent proxy for the dynamism of an economy. And these charts don’t bode at all well, on that front.


In my experience the only businesses getting investments are internet startups – as long as they have a potential for high user volume. Technology and how they’re going to make money is second hand.

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Can we have a TARP for jobs?

Felix Salmon
Sep 11, 2012 14:25 UTC

First, go and check out Mike Konczal’s wondrous gift to the internet today, a fabulous GIF-filled guide to QE3 and monetary policy, where I found the GIF above. It neatly encapsulates the greatest problem facing America today: people can’t find work.

This is not an existential crisis on the order of the financial crisis of 2008-9: if we fail to solve it, the entire economy won’t grind to a halt. But it’s a crisis all the same, and it’s being tackled with much less urgency — and much less money — than was brought to bear on the financial crisis.

And so Deborah Solomon’s idea is, at least in principle, a good one. She notes that no one expected Treasury to recoup much if any of the money it spent on the various bailouts, and that TARP, in particular, was considered a permanent government expenditure rather than some kind of temporary loan to the financial system. Now that hundreds of billions of dollars of TARP funds have found their way back to Treasury, couldn’t they be recycled to help, not Wall Street this time, but the unemployed?

The four-year anniversary of the financial crisis should prompt policymakers to consider using some of the money — funds that were never expected to be returned to the government’s coffers — to assist those in need. Some 12.5 million Americans remain unemployed, and 40 percent have been out of work for six months or longer. Almost 15 percent of Americans rely on the government for food stamps. The 8.1 percent unemployment rate, while far better than its peak of 10 percent, crept down last month largely because so many people have given up looking for work.

That $353 billion could go a long way toward helping struggling Americans who would benefit from some type of relief — whether through tax cuts or the extension of benefits. The U.S. taxpayer stepped in to help Wall Street in its time of need. It’s time for Wall Street, albeit indirectly, to return the favor.

The distinction to bear in mind here, however, is not that between Wall Street and Main Street, but rather that between stocks and flows. TARP wasn’t a new income stream for Wall Street; it was a one-off injection of capital, which got Wall Street back onto its feet, to the point at which banks were pretty much the first companies to start becoming hugely profitable again after the recession hit.

So the condign use of TARP funds in an unemployment context would not be through things like tax cuts or benefit extensions. Instead, it would be a massive capital expenditure: we would build a job cannon, and a whole forest of jobies, and manufacture a huge pile of job helmets, and fire off the unemployed to the wonderful world known as jobland, where they could live happily ever after without any further government support.

Buying a bunch of long-dated agency securities — quantitative easing — is not that. Besides, we’re talking about fiscal policy, not monetary policy, here. But even fiscal policy can’t easily create permanent jobs with one-off expenditures. A dynamic economy is just that: it’s dynamic, and the number of people being hired and fired every week is enormous. The total number of jobs is going up, far too slowly. But permanent jobs don’t — and shouldn’t — exist. What we really want to create is an economy where for every person who gets fired, two people get hired. That would bring unemployment down sharply.

Which brings me to the major speech that Barack Obama gave on September 8. No, not his acceptance speech at the Democratic National Convention — that was September 6, in any case. But rather the speech he gave on September 8 2011, presenting — and costing out — the American Jobs Act. And it turns out that the cost of Obama’s jobs act, which he doesn’t seem to mention much any more, was $447 billion: very much in Deborah Solomon’s ballpark.

Would the jobs act create job cannons and job helmets and jobies? Of course not: there’s no simple Main Street corollary to TARP which can be implemented with the requisite political will and a few hundred billion dollars. Job creation is more of an art than a science, and there aren’t any real experts in it. But at least Obama has (or had) a real, detailed plan. And, as Treasury officials love to say, as a general rule, plan beats no plan.


>>which he doesn’t seem to mention much any more

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