An Era Of High Unemployment

Tyler Cowen and Jayme Lemke think we've entered one:

About one in 20 labor force participants lost their jobs, yet sales are back to normal. The obvious but uncomfortable implication is that many of those workers were not adding much value to their companies in the first place. In other words, there had been many “zero marginal productivity jobs” on the books, propped up by the previous boom and the housing bubble.

Once you see many of these jobs as having adding little economic value, it becomes difficult to imagine a quick fix. It is unlikely that just waiting for wages to fall will reemploy these people, nor is additional fiscal stimulus from the government likely to help. The unemployment problem seems daunting.

Cowen and Lemke recently made a more detailed version of this argument in Foreign Policy:

[T]he U.S. economy is going through some major structural shifts. It's not a question of getting back to where we were, but rather that the economy must solve a new problem of re-employing a lot of people who were not, in reality, producing very much in the first place. That's a steeper challenge than we had realized early in the stages of this recession -- and so far policymakers have failed at meeting it.

Analysts still disagree on how rapidly the U.S. economy will recover. But they're missing the point. The era of low unemployment may be in our rearview mirror for a long time to come. 

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