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Will it be another jobless economic recovery, like after the last recession? Or will the labor market bounce back strongly, as it did after the downturns of the 1970s and 1980s?
Perhaps it will be a bit of both, concludes a paper being presented Thursday at the Brookings Panel on Economic Activity by economists Michael Elsby of the University of Michigan, Bart Hobijn of the San Francisco Federal Reserve Bank and Ayşegűl Şahin of the New York Federal Reserve Bank.
The labor market languished after the 2001 recession, with job losses continuing until late 2003. That experience, along with the tepid job market recovery following the 1990-91 recession, convinced many economists that something had changed about the economy and that in the wake of modern recessions, job growth was much slower in the past.
But the economists' research suggests that what was really different about the 1990-91 and the 2001 recessions wasn't so much that they were modern, but that they were shallow.
Job losses in shallow recessions, they argue, are driven primarily by a slowdown in the rate of hiring, as opposed to layoffs. In severe recessions, job losses have historically been driven by both layoffs and a drop in the rate of hiring, with the drop in hiring persisting longer than the increase in layoffs. The latter appears to be what's happened this time around.
So there's a case to be made that the jobs rebound — which many economists expect will begin to register in the March employment figures — will be bigger this time than after 2001.
But the economists also note that the labor market behaved in the early part of the recession much as it did in past recessions, it has begun to look different in the past several months. “The record rise in long-term unemployment? is likely to yield a persistent overhang of workers facing long unemployment spells, slowing the recovery,” they say. The extension of unemployment compensation “is likely to have led to a modest increase in long-term unemployment,” they add.
The long-term unemployed typically have a harder time getting work, so that could make for a somewhat slower jobs recovery.
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From time to time, however, the curtain has been lifted long enough for us to see behind it. A number of reputable authorities have attested to what is going on, including Sir Josiah Stamp, president of the Bank of England and the second richest man in Britain in the 1920s. He declared in an address at the University of Texas in 1927:
The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again. . . . Take this great power away from them and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.
Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta in the Great Depression, wrote in 1934:
We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.
Graham Towers, Governor of the Bank of Canada from 1935 to 1955, acknowledged: Banks create money. That is what they are for. . . . The manufacturing process to make money consists of making an entry in a book. That is all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created — brand new money. Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in an interview reported in the August 31, 1959 issue of U.S. News and World Report: [W]hen a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone else’s deposit; it was not previously paid in to the bank by anyone. It’s new money, created by the bank for the use of the borrower.
Gee Lets allow an Entity to create currency and require that we all use their money (legal tender laws) I wonder who benifits from that?
I’m all done ranting now
one other thing, Mr Government….. make our students work harder….increase math/science requirements and help restore the work / common sense ethic before China rolls over us like a locomotive…. and get rid of that DEFICIT….that worries me more than anything else. Americans can afford to pay what it takes to save medicare without borrowing, if we’ve not been wangled out of our jobs by the Chinese govt manipulating currency. Double the MCR portion of the SS tax… it’s only a couple percent anyways! If people live that close to the edge (those with comfortable middle class incomes) they probably deserve a whipping if they are 2 percent from going over the edge.
Pessimism is hurting us JUST as much as the recession. Maybe it IS time for tariffs,,,,, we need some hope out here
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