As Blogger continues to gulp down my labor-intensive posts, I'd like to offer this quickie that I think is incredibly important, and hopefully not tasty enough to tempt the Blog monster this late in the evening.
Please click in the graphic as you follow the logic in the discussion below.
Who said graphs wouldn't be fun? (I know I certainly never told my students that.)
April 7, 2012
Reactions and Overreactions
Hmm. I see that some people are accusing me of overreacting to one bad month of job news. Um, no. What has actually been happening is that conventional wisdom overreacted to four months of good(ish) news, and the March numbers were a useful corrective.
Look at my current favorite measure of the labor market, the employment-population ratio of prime-age Americans — employment rather than unemployment so as to avoid distortion by people dropping out, prime-age to avoid demographic issues as the population ages. Here it is:
What has been happening lately is that conventional wisdom, including among people with influence over policy, has taken that little uptick at the right as evidence that it’s time to sound the all-clear, time to call off efforts to boost the economy and worry about inflation instead. This was a terrible misjudgment: we’ve barely made a dent in the employment decline that followed the financial crisis, and are still a very long way from full recovery....
And you can’t even count on the trend continuing to be favorable — which was the message of last month’s numbers.
I was for more stimulus before those numbers came out; I’m still for more stimulus now. The only difference is that it might be a bit easier today than two days ago to argue against unjustified complacency.