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Weekly Wrap: That four letter word j-o-b-s
Potential employers meet with students at a career fair in New York City.
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This week we speak with Leigh Gallagher of Fortune magazine and John Carney of CNBC.
On whether there are any signs of hope in the latest jobs report for the long-term unemployed:
Leigh Gallagher: Well, it hasn't been the most disappointing report we've seen over the past 18 months, we can say that. It was disappointing. And this is after last month, which actually surprised on the other side -- it was a lot better than people anticipated. So we're kind of bouncing along here around this kind of general state of the job market is not soaring back by any means and it's not likely to any time soon. So this is a persistent problem that we're going to have with us for a very long time.
On whether the Fed will do something after this latest jobs report:
John Carney: I think the Fed is definitely going to act. We don't know exactly what they are going to do, but they're almost certain to take some action at their next meeting. Whether that just means that they change the language they use to emphasize that they are going to stay more accomdating for an even longer period or whether they actually go out and start buying various financial assets is not clear right now. But I'll guarantee right now that they will do something at their next meeting.
For more analysis, click the play button on the audio player above.
The thing the fed fails to understand is that the job market is suffering BECAUSE of the quantitative easing. It's like giving more drugs to an addict and then wondering how long it's going to take for him to get clean. And then saying we're ready to administer more drugs as long as he needs them.
The QE prevents the necessary, but unpleasant process of restructure. Without QE it forces the people invested incorrectly to take their losses.
In an actual free market a surplus of labor would force labor prices down which would in turn allow activities to be financially viable. There would be less pressure to move jobs out of the country. But because of all the rules and mandates on employers, prices aren't allowed to fall, so we get unemployment. We also have the government as the labor buyer of last resort. It will pay people to idle their labor. Sure the pay is less than they made in their job, but the work hours are a lot better. People can afford to leave the work force this way.
One of the main ways that QE helps unemployment if any, is thatit reduces real wages by way of inflation. So instead of having wages fall by market forces in labor sectors in surplus, everyone gets a pay cut by way of inflation reducing the purchasing power of their wages.
Unfortunately the world has changed, and the US has not accepted that. Unlike the Japanese and Germans, the US has been willing to export (or fail to capture) some of the better jobs like renewable energy, manufacturing and technology leaving new opportunities primarily in a low paying service sector. We expect to get unlimited and cheap oil to fuel gas guzzling SUV's and trucks oblivious that the market for oil is a world market. It's good for security to have domestic oil, but with 3% of the worlds oil reserves the US will not likely impact world prices. For complicated economic structural reasons, some Europeans are really suffering on a large scale; 8+% unemployment isn't good but some European countries are double or triple that, which dramatically impacts us. In aggregate the EU, if fully integrated, would be the largest economy in the world. Roosevelt unexpectedly won the 1936 election eight years into the Depression by the largest electoral margin. Our challenges will not easily be remedied. Suck it up, America, the 20th Century is over, and we need to be more creative and intelligent.
