Zero Job Growth: Low Rates and High Deficits Aren't Helping U.S. Workers

The article concludes that interest rates are the key difference between now and the Carter/Reagan era.

The Answer to an "Unsolved Mystery" - of 30 Years

In the early 1980s, interest rates were exceptionally high; today (at least since 2008), they have been exceptionally low.

On the other hand, productivity growth - which is actually labor productivity growth (as in the growth in output per man-hour) - is unexpectedly high today and was unexpectedly low in the early 1980s.

These two factors are connected.

Very high interest rates make capital expensive, and therefore divert resources into hiring more labor. As a result, those high rates produced faster job creation after the 1982 recession.

Conversely, the extremely low interest rates we see at present make capital very cheap, and therefore prompt businesses to invest in extra equipment. That helps companies save on labor costs, and helps boost corporate profits, but produces very sluggish job growth in the overall economy. (We saw fairly sluggish job growth in the post-2001 recovery, also.)

In short, what we've done here is to solve a mystery that has puzzled economists for 30 years.

The decline in productivity growth in the 1970s and 1980s was not due to any defect in economic policies, but simply to the high cost of money, which diverted resources from capital into labor.

Similarly, the cheap-money environment that's existed since 1995 - and particularly since 2008 - has produced an apparent spurt in productivity growth, as extra capital is used to save labor.

The result: The fast job growth that we saw after 1982 has been transformed into slow job growth today.

Back in 1984, Ronald W. Reagan ran for re-election on a platform of "Morning in America" - credible because of the huge job growth the country experienced in the preceding two years.

Today, unfortunately, the American worker must struggle through the economic equivalent of a polar night - a protracted stretch of darkness that seems like it's never going to end. But unlike the polar nights of Alaska, which last six months, workers are looking at an economic variant that will last for years.

That dismal outlook is the fault of the low-interest-rate policies of U.S. Federal Reserve Chairman Ben S. Bernanke. And until those policies change, there won't be a new dawn - and definitely very little sunshine - on the U.S. jobs front.
 
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Managements zeal for using chinese slaves instead of americans was not as passionate in 82 either. That's another major difference.
 
don't even attempt to compare our economy to Englands.

Zero job growth is bullshit. Although only 36,000 in January, revisions for Nov & Dec were plus 75,000. So over 100,000 in a couple months, and by spring the monthly average will be 100k
 
Topspin said:
don't even attempt to compare our economy to Englands.

Zero job growth is bullshit. Although only 36,000 in January, revisions for Nov & Dec were plus 75,000. So over 100,000 in a couple months, and by spring the monthly average will be 100k
Click to expand...

Um toppy... 100k per month is anemic. It is not enough to keep pace with net new workers entering the workforce.
 
Superfreak said:
Um toppy... 100k per month is anemic. It is not enough to keep pace with net new workers entering the workforce.
Click to expand...

I don't dissagree, but at 100,000 per mo my stocks will be banging ass better than Johnny Depp at a cougar gathering.:good4u:
 
Topspin said:
don't even attempt to compare our economy to Englands.

Zero job growth is bullshit. Although only 36,000 in January, revisions for Nov & Dec were plus 75,000. So over 100,000 in a couple months, and by spring the monthly average will be 100k
Click to expand...

Who mentioned England?
 
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