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As World Leaders Meet, Global Unemployment Is Topic No. 1

The ultimate measure of economic success is not whether the stock or bond markets go up … but rather whether a society can provide decent jobs for its citizens, writes Jack Ewing in the NYT (the global edition of the New York Times).

He concludes: Mr. Loungani worries about the corrosive effects of unemployment on people and societies. “I know from my own experience the loss of confidence in your own skills that comes with the 200th job rejection letter,” he said. “That’s why it’s so important to get people back soon. You risk making a cyclical problem into a structural problem.”

Read the full article here

 

The ultimate measure of economic success is not whether the stock or bond markets go up … but rather whether a society can provide decent jobs for its citizens, writes Jack Ewing in the NYT (the global edition of the New York Times).

He concludes: Mr. Loungani worries about the corrosive effects of unemployment on people and societies. “I know from my own experience the loss of confidence in your own skills that comes with the 200th job rejection letter,” he said.

Read the full article…

Posted by at 2:12 PM

Labels: Unemployment

New York Times, Huffington Post and the Washington Post on the recent F&D article

In the New York Times, Paul Krugman writes that “In the first half of last year a strange delusion swept much of the policy elite on both sides of the Atlantic — the belief that cutting spending in the face of high unemployment would actually create jobs. I went after this stuff early and hard (I suspect that the confidence fairy will be one of my lasting contributions to economic discourse); still, it’s good to have a steadily mounting weight of evidence about just how wrong that view was. The latest entry is a comprehensive review of past episodes of austerity by economists at the IMF, from which the figure above [below, Chart 3] is taken. Yes, contractionary policy is contractionary.” 

Alexander EIchler of the Huffington Post summarizes the article: “The report, published in the new issue of Finance & Development, the IMF’s quarterly magazine, argues that moving too rapidly to enact so-called austerity measures — in other words, taking steps to shore up national finances and bring down debt by cutting spending and raising taxes — will hurt income in the short term and worsen unemployment in the long term.”

And, Brad Plumer of the Washington Post writes that “More specifically, an austerity program that curbs the deficit by 1 percent of GDP reduces real incomes by about 0.6 percent and raises unemployment by almost 0.5 percentage points. What’s more, the IMF notes, the losses are twice as big when the central bank can’t cut rates (a good description of the present.) Typically, income and employment don’t fully recover even five years after the austerity program is put in place. There’s also a class dimension here: A deficit cut of that size tends to cause real wage income, where lower-income folks get their money, to shrink by 0.9 percent, whereas rents and profits, which higher-income folks depend on, decline by just 0.3 percent. And, as the chart on the right shows [below, Chart 4], profits tend to bounce back faster than wages.”

Read full article on the IMF website.

In the New York Times, Paul Krugman writes that “In the first half of last year a strange delusion swept much of the policy elite on both sides of the Atlantic — the belief that cutting spending in the face of high unemployment would actually create jobs. I went after this stuff early and hard (I suspect that the confidence fairy will be one of my lasting contributions to economic discourse); still, it’s good to have a steadily mounting weight of evidence about just how wrong that view was.

Read the full article…

Posted by at 12:46 AM

Labels: Unemployment

Whom Will it Hurt? The Short-Run Impacts of Fiscal Consolidation

WHEN British Prime Minister David Cameron announced his government’s deficit reduction plans earlier this year he said, “Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong. You cannot put off the first in order to promote the second” (Cameron, 2011).

The challenge facing the United Kingdom and many advanced economies is how to bring debt down to safer levels in the face of a weak recovery. Will deficit reduction lead to stronger growth and job creation in the short run?

Recent IMF research provides an answer to this question. Evidence from data over the past 30 years shows that consolidation lowers incomes in the short term, with wage-earners taking more of a hit than others; it also raises unemployment, particularly long-term unemployment.

For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans. At the same time, we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. Hence the potential longer-run benefits of fiscal consolidation must be balanced against the short- and medium-run adverse impacts on growth and jobs.

Read full article on the IMF website.

WHEN British Prime Minister David Cameron announced his government’s deficit reduction plans earlier this year he said, “Those who argue that dealing with our deficit and promoting growth are somehow alternatives are wrong. You cannot put off the first in order to promote the second” (Cameron, 2011).

The challenge facing the United Kingdom and many advanced economies is how to bring debt down to safer levels in the face of a weak recovery.

Read the full article…

Posted by at 10:42 PM

Labels: Unemployment

Roubini ups his recession probability from 40% to 60%

The 40% prediction was made in a talk at the IMF in September 2010. Below is what he said a few days ago for the current scenario and few years back:

August 2011 (Portfolio.com

“We’ve reached a stall speed in the economy, not just in the U.S., but in the euro zone and the UK. We see probably a 60 percent probability of recession next year, and, unfortunately, we’re running out of policy tools. Every country is doing fiscal austerity, and there will be a fiscal drag. The ability to backstop the banks is now impossible because of political constraints, and sovereigns cannot bail out their own distressed banks because they are distressed themselves,”

September 2006 (IMF)
“my view is that the risk of a hard landing is very high for the U.S. economy. I see essentially a recession coming by next year. I give it a very high likelihood. I argue that housing today, like the tech bust in 2000-2001 will have a macro effect; it is not going to be just a sectoral effect. I argue that U.S. consumers are now close to a ‘tipping over’ point given all the vulnerabilities I have discussed. I argue that the Fed easing will occur, so the next move is going to be a cut, but it is not going to prevent a recession. And, finally, I argue that the rest of the world is not going to be able to decouple from the U.S. even if it is not going to experience an outright recession like the United States. So on that cheerful note, I will stop.”

The 40% prediction was made in a talk at the IMF in September 2010. Below is what he said a few days ago for the current scenario and few years back:

August 2011 (Portfolio.com

“We’ve reached a stall speed in the economy, not just in the U.S., but in the euro zone and the UK. We see probably a 60 percent probability of recession next year, Read the full article…

Posted by at 1:48 AM

Labels: Profiles of Economists

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