Matthew Yglesias » Labor Market Freefall

Jan 9th, 2009 at 4:44 pm

Labor Market Freefall

CAP graph:

Heather Boushey wrote words to go with it.

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21

Filed under: Economy, Labor Market,

21 Responses to “Labor Market Freefall”

24AheadDotCom Says:
January 9th, 2009 at 5:17 pm
I’m sure then that we’ll see MattY laughing heartily at this plan from his friends just slightly to the left.
daveNYC Says:
January 9th, 2009 at 5:17 pm
And the chances are pretty good that the December number will be revised down.
formerly k Says:
January 9th, 2009 at 5:21 pm
If I recall correctly, even the nominal increase in employment in 2007 was insufficient to keep pace with the number of people entering the labor market every month.
Richard Steven Hack Says:
January 9th, 2009 at 5:22 pm
Notice from this article that the worst was from the last three months. That doesn’t bode well for the next three months. It ain’t over, folks.

http://www.marketwatch.com/News/Story/Story.aspx?guid={F9716B93-2009-4F9D-A2CC-6890DA427BF2}

Nearly 2.6 million jobs were lost in 2008, with 1.9 million destroyed in just the past four months, according to a survey of workplaces. It’s the biggest job loss in any calendar year since 1945, when 2.75 million jobs were lost as the wartime economy was demobilized.

The 1.5 million jobs lost in the fourth quarter were the most in any three-month period since 1945.

As a percentage of employment, job losses in 2008 totaled 1.8%, the worst since 1982 and the third-largest since the war.

The unemployment rate rose to 7.2%, the highest in 16 years.
rapier Says:
January 9th, 2009 at 5:31 pm
Get used to it.

We used to have recessions all the time. They were not fun but they were short. Then in a fit of genius politicians decided to make full employment part of the Feds portfolio in the Humphrey Hawkins Full Employment Act of 1978. Soon after Volker became Fed Chairman and he ignored the suggestion as any good central banker would do. Now the law really amounted to a suggestion. There is no way to force the Fed to do anything. Volker like any good central banker ignored the suggestion and actually spit in it’s face. The recession of 81 82 was bad but it wasn’t like anyone thought the endo of the world as we know it was at hand, like now.

Then came Greenspan. He absolutely loved obliging the politicians and Wall Street with perpetual easy money and progressively more lax bank regulation and lowered reserve requirements. It must be noted that Wall Streets love of easy money was a newfound love when Greeny took over. Traditionally big capital was opposed to easy money but they were warming to it as the 80s wore on. Then came Black Monday, October 87.

The love of easy credit and perpetual low interest rates sprang from the realization that with new fangled computers the creation and trading of financial products and their derivatives was incredibly easy and hugely profitable. That was going on already by Black Friday, when so many profits went poof. Black Friday hinted at a structural failure which might bring on a really bad recession.

Greenspan stepped into the breach and promised unlimited liquidity to the financial system to stabilize it. The lesson learned? Not that financial inventivness might produce systematic risks and should be avoided but rather that when the occasional problems arose the Fed would step in and save the day.

As time went on every new crisis presented a larger risk to the system. More and more of the economy and especially corporate profits were contingent upon ever inflating asset prices. Especially financial asset prices. Greeny told us we must have easy money or a bad recession might ensue. Nobody wanted that, and besides, he had been told to prevent them by the politicians.

There are other complexities having to do with how credit creation slipped the bounds of the banking system and centered on Wall Street. To the investment banks, not under the Feds blanket.

Anyway Econ 102 teaches there is a business cycle and things overheat and then the Central Bank takes away the punch bowl by restricting credit. Recession ensues and wrings out the excesses and we rise again. Well since we eliminated the downside, essentially, for 20 years the excesses go so gigantic that now there cannot be a little recession.

The credit excesses of the age are many orders of magnitude greater than those of the 20’s, which caused the great Depression. The probable downside is easily just as bad.
gordon gekko Says:
January 9th, 2009 at 5:40 pm
On the other hand real hourly wages rose by 4% (annualized). While this is a perfectly reasonable occurrence, given unexpectedly low inflation and the nature of layoffs, I doubt if Obama were president it would be so quickly dismissed. At least one progressive blogger would have to say something along the lines of “Obama restores some confidence in the economy as seen by rising wages.”
Steve LaBonne Says:
January 9th, 2009 at 5:46 pm
You lose that bet, Gordo. Real wages rose more than that under Clinton, but that was still little enough to be widely and correctly denounced as stagnation.

P.S. Greed isn’t good.
rapier Says:
January 9th, 2009 at 5:51 pm
#6 Well sure. Few Democrats could bring themselves to criticize Clinton when he brought in Rubin and institutionalized the Wall Street Paradigm of wild cat finance and obliterated every last memory of Democratic economic principals.

I blame him more than Bush. Of course the GOP wanted unlimited finance and endless inflation of assets. Bush took what was in place and did nothing. What more was there to do? Perfection had been achieved.
Steve LaBonne Says:
January 9th, 2009 at 5:53 pm
Few Democrats could bring themselves to criticize Clinton when he brought in Rubin and institutionalized the Wall Street Paradigm of wild cat finance and obliterated every last memory of Democratic economic principals.

Few MAINSTREAM Dems, sure. Not left-liberals, who criticized these things forcefully but unavailingly, just as they’re wary of Obama’s neoliberal tendencies now.
rapier Says:
January 9th, 2009 at 6:09 pm
Well in Obama’s defense the memory of what those principals were has been lost. He’s too young to remember. There is not a person within three degrees of separation in our political elites of either party who does not think Free Market Fundamentalism is perfection.

He knows not what he does. Unless he pulls an FDR who gave not the slightest hint in the campaign that he would lash out and call out the pigmen of finance in his inaugural. I don’t think he can because he cannot conceive it. If perchance he did I think the right might start, slowly, an armed insurrection. Lead by FOX and Rush and the long long list.

“,,,this is because the rulers of the exchange of mankind’s goods have failed through their own stubbornness and their own incompetence, have admitted their failures and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True, they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money.

Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored conditions. They know only the rules of a generation of self-seekers.
JonF Says:
January 9th, 2009 at 6:10 pm
Clinton’s economy had real growth and a major technological revolution. I am not creditin Clinton with that, just pointing out a significant difference between Clinton’s era and Bush’s. The latter era has been marked mainly by a Potemkin economy.
Calvin Jones and the 13th Apostle Says:
January 9th, 2009 at 6:31 pm
If I recall correctly, even the nominal increase in employment in 2007 was insufficient to keep pace with the number of people entering the labor market every month.

Job creation sucked way before 2006. I forget what the number that is needed to keep up with new entries, but it was hardly ever met under Bush. Bush’s Labor Dept. has been fudging the numbers for a long time. Have you seen the U-6? It’s like at 13% That is closer to a true number of the unemployed.
Steve LaBonne Says:
January 9th, 2009 at 7:28 pm
Well in Obama’s defense the memory of what those principals were has been lost. He’s too young to remember. There is not a person within three degrees of separation in our political elites of either party who does not think Free Market Fundamentalism is perfection.

Not buying that excuse. Even quite conservative economists are urgently recommending a bolder stimulus than Obama is so far proposing. It’s disturbing that he’d ignore their advice in favor of a futile attempt to throw a sop to the Republicans.
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Matt Yglesias

Labor Market Freefall

21 Responses to “Labor Market Freefall”

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