The dismal state of employment

Since the economy is choo chooing at a reasonable steady rate both in nominal and real terms, given the tightening stance of fiscal policy, culminating in the sequester, it appears that the Fed is offsetting the fiscal tightening. It is, but just; there being no attempt to get the economy to a more amenable ‘cruising altitude’.

In this case, what should be ‘low’ remains ‘high’. That´s the case of long-term unemployment, for example. The chart shows that it´s a ‘first’ in the post-war era.

But if you examine the next chart you will observe that the length of time employment takes to regain its previous peak (which surely must be an important determinant both of the level long-term unemployment reaches and how far it falls) is closely associated with the speed with which nominal spending (NGDP) grows. And this ‘train’ is going real slow!

Although the unemployment rate (U3) is slowly falling, given the lamentable labor force participation rate this has to be taken with a grain of salt. And if you look at a more encompassing measure of unemployment (U6), which includes discouraged workers and those marginally attached (working part-time for economic reasons), things are not getting better. In April while the U3 rate inched down from 7.6% to 7.5%, the U6 rate moved from 13.8% to 13.9%.