The Macroeconomic Situation: Mark Thoma Asks the Obvious Question
"Instead of Twirling Our Thumbs We Have Rolled Up Our Sleeves"

A Bad Labor Report All the Way Through...


Paul Krugman:

Falling Wages: Ugh. That was a seriously ugly jobs report (pdf). Almost no job creation, with slow private-sector growth offset by falling public-sector employment; a falling employment-population ratio; and (I don’t know how many people have picked this up), an actual [monthly] decline in wages, albeit a small one. Let me emphasize that last point. My bottom line on the inflation-deflation issue has always been to look at wages; you can’t have a wage-price spiral if wages ain’t spiraling. And they aren’t, to say the least. It’s important to realize, by the way, that stagnant wages are NOT good for recovery; all they do is ensure that the burden of debt relative to income remains high, keeping demand and employment down.

The situation cries out for aggressively expansionary monetary and fiscal policy. Instead, however, all the political push is in the opposite direction.


NEC and NEC: Laura Tyson — who headed the National Economic Council under Clinton — has an excellent, clear, sober discussion of the economic problem at the FT. She calls for long-run fiscal restraint, but more, not less, spending right now, with the economy deeply depressed. Laura is anything but a radical; what she’s saying is basically macroeconomics 101. Meanwhile, the current NEC director, Gene Sperling, is spouting right-wing talking points, essentially claiming that you can do the opposite of what macro 101 says you should do, and the confidence fairy will make everything OK.

You can argue that Laura’s program is politically infeasible; but that doesn’t mean that the administration has to embrace right-wing nonsense. Unless, of course, it actually believes it.