I think that when the history of this era is written, and future historians wonder why we Americans did not respond to our economic challenges, the conclusion will be that the entire economics profession failed. We are now five years into our economic crisis, which is half a decade. It’s not hard to imagine that we will wander in the wilderness for another five years. This could be a decade-long period in which millions of Americans were simply cut out of our productive workforce.
Consider the latest case of failure. In Friday’s newspapers, we were treated to the headline in the New York Times, “More U.S. Economists See Half-Full Glass.” Michael Hanson, senior U.S. economist at Bank of America Merrill Lynch, was quoted as saying, “False dawns notwithstanding, it seems like a number of headwinds are fading. We’re growing more optimistic, and the risks are now more to the upside than the downside. It’s the first time in a long time that we could say that.”
Another economist, Bernard Baumohl, chief global economist at the Economic Outlook Group, said, “Everything seems to be flashing green. The dynamics have changed and we are going to break out of the pattern we’ve seen in the last couple of years.”
All of this was in anticipation of the Labor Department jobs report on Friday, which economists predicted would show that the economy created just under 200,000 new jobs in December.
Then the number came out–just 74,000 jobs were created. The same Times reporter, Nelson Schwartz, had to write: “Just when it seemed as if the economy was finally accelerating, the latest employment figures once again confounded expectations of better days ahead.”
The headline read: “Growth in Jobs Slows Sharply to 3-Year Low.”
Sure, the unemployment rate ticked down to 6.7 percent from 7.0 percent but the analysis was universal: that’s because more people have simply stopped looking for jobs. They have given up. So they are no longer counted. Among workers aged 45 to 54, the rate of participation in the work force dropped 0.4 percentage points to 79.2 percent, the lowest rate since 1988.
The usual caveats apply: one month’s data is not conclusive and bad winter weather could have played a role.
But when are the economists going to start coming up with proposals for how to create jobs? When are they going to understand the structural challenges facing the economy rather than simply wishing and hoping that “things will get back to where they were?” I don’t think it is ever going to happen. And even more importantly, when will the Obama Administration stop listening to people who don’t know anything and have been consistently wrong?
