The Deadman Night Rider

A forum for evening students of the SMU Dedman School of Law and other outlaws..

Monday, July 18, 2005

NYT still trying to reverse-engineer lemons out of lemonade…

The editorial page of the New York Times has been beside itself the past few months over the dearth of bad economic news coming down the pike. Since their attempts at manufacturing bad news, including breathless reports of the impending demise of the middle class, have been failures in the main, they’ve now turned to trying to parse bad news out of good. First there was Bob Herbert complaining that the recovery has produced too few jobs for high school dropouts and unskilled workers (which we used to be warned would be the only jobs left after the evil scourge of outsourcing had exported all the high-skill, high-wage jobs overseas), and today Paul Krugman opines that our 5 percent unemployment is just a chimera, lipstick on a pig.

Like a lot of other commentators recently, Krugman zeroes in on the fact that the government doesn’t count people who aren’t looking for work as unemployed – thus the disaffected, disenfranchised masses that have despaired of ever finding work and just given up aren’t included in the figure. This is a problem that, much like homelessness, only seems to occur during Republican administrations.

PK cites this report from a senior economist at the Federal Reserve Bank that claims the ‘true’ unemployment rate might be as high as 8%, calculated by comparing the proportion of non-working to working populations of various age groups at different points of past business cycles. He claims the study proves that there are millions of Americans out there who would be looking for jobs if there were more jobs to be had, which is like saying there would be a lot more hungry people if there were more food available. In fact, if you read the study itself, it concludes that the lower participation rate is not a result of reaction to the labor market, but due to other factors, including what it terms a ‘secular downshift’ in women’s participation in the workforce, a trend that was established even before the recession began. The other large drop off in participation was among teens, which surely ties into the increasing enrollment in college and tech schools – another positive development.

Even at the outside, 8% unemployment isn’t exactly soup lines and brother-can-you-spare-a-dime, but that doesn’t deter Krugman. He points to a Gallup poll revealing that only 3 percent of the respondents called the economy ‘excellent’ and 33 percent rated it ‘good’. He sarcastically suggests that perhaps people are just ungrateful, or that they’ve been misled by media reports. My feeling (just as much conjecture as Krugman’s) is that we are still clinging to the unrealistic hope the tech boom will re-occur. It’s tough to impress people who watched the Dow shoot from 3500 to over 10K in recent memory.

Krugman wraps it up with a telling question: where will future expansion come from, given the fact that we’ve cut taxes and interest rates so far? It’s no wonder he’s so pessimistic – his conception of the engine of economic growth is government. Have fun sucking on that lemon, Paul.


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