South By North Strategies, Ltd.

A Bleak Assessment

Mark Thoma of Economist’s View assesses the future of the labor market and “gives up” on policymakers …

I’ve been pushing hard for more help for labor markets for quite awhile — at times I’ve thought it was a bit repetitive, but necessary — but it’s probably time for me to give up and accept that we are going to have a slower recovery than we could have had with more aggressive fiscal policy. Unless there is a dramatic reversal of recent indications that we are at the beginning of a recovery, Congress is not going to provide anything more than token help from here forward.
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Because monetary policy loses effectiveness in a deep recession — something I’ve been teaching for decades — I was among the first to call for aggressive fiscal policy. Fiscal policy creates demand directly, it does not rely upon incentives and the hope that people will respond to them. When the crisis hit, we needed fiscal policy right away. Given the lags between changes in policy and actual effects on the economy, which were known to be lengthy, and given that monetary policy was not going to be enough, there was no time to “wait and see” (as many people I respect were calling for). But the reality is that fiscal policy didn’t get put into place until much, much later, far too late to stop the worst of the downturn (and it wasn’t big enough anyway)…
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But, as I said at the beginning, even though it’s not too late for more help to make a difference, it’s not going to happen. Now that the recovery seems to have started and the budding optimism is apparent, we will turn our attention elsewhere, to financial reform, to global warming, and to other issues. We’ll forget about all the people who could have been working, but instead have to hope Congress doesn’t cut off their unemployment insurance before they can find a job.

Around the Dial – April 6

Economic policy reports, blog postings, and media stories of interest:

• Mother Jones looks at how states could slow health insurance reform.
• Paul Krugman discusses financial reform.
• The Economic Policy Institute considers regulation of student internships.
• The Big Money argues that the housing bust isn’t over.

February Job Openings

The latest version of the  Job Openings and Labor Turnover Survey conducted by the U.S. Bureau of Labor Statistics found that job openings remained scarce in February, the most recent month for which data are available.

There were 2.7 million job openings on the last business day of February 2010, the U.S. Bureau of Labor Statistics reported today. The job openings rate was little changed over the month at 2.1 percent. The hires rate (3.1 percent) and the separations rate (3.1 percent) were also little changed in February.
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Over the 12 months ending in February, hires totaled 48.3 million and separations totaled 51.5 million, yielding a net employment loss of 3.2 million.

A Broken Jobs Machine

Writing in The Washington Monthly, Barry Lynn and Phillip Longman of the New America Foundation explore the role that monopolization has played in limiting job growth.

But while the mystery of what killed the great American jobs machine has yielded no shortage of debatable answers, one of the more compelling potential explanations has been conspicuously absent from the national conversation: monopolization. The word itself feels anachronistic, a relic from the age of the Rockefellers and Carnegies. But the fact that the term has faded from our daily discourse doesn’t mean the thing itself has vanished—in fact, the opposite is true. In nearly every sector of our economy, far fewer firms control far greater shares of their markets than they did a generation ago.
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It is now widely accepted among scholars that small businesses are responsible for most of the net job creation in the United States. It is also widely agreed that small businesses tend to be more inventive, producing more patents per employee, for example, than do larger firms. Less well established is what role concentration plays in suppressing new business formation and the expansion of existing businesses, along with the jobs and innovation that go with such growth. Evidence is growing, however, that the radical, wide-ranging consolidation of recent years has reduced job creation at both big and small firms simultaneously. At one extreme, ever more dominant Goliaths increasingly lack any real incentive to create new jobs; after all, many can increase their earnings merely by using their power to charge customers more or pay suppliers less. At the other extreme, the people who run our small enterprises enjoy fewer opportunities than in the past to grow their businesses. The Goliaths of today are so big and so adept at protecting their turf that they leave few niches open to exploit.

Around the Dial – April 5

Economic policy reports, blog postings, and media stories of interest:

• The New York Times documents corporate abuses of unemployment insurance.
• The News & Observer discusses the bursting of the real estate bubble.
• Naked Capitalism asks if “extend and pretend” has worked.
• The New Republic looks at the ties between China’s internal politics and economic policies.