ICYMI: Paul Krugman: "The Meaning of an Awesome Employment Report"

Yesterday, Nobel Prize-winning economist Paul Krugman argued that President Biden "is presiding over the best job market America has seen in a generation — specifically since the boom of the late Clinton years." Noting that "the speed and extent of America's recovery from the pandemic shock have been incredible."

"After the 2008 financial crisis, it took 12 years for employment rates to get back to pre-crisis levels. But only three years after Covid struck, employment is fully back for almost every age and demographic group."

Krugman continues, saying that there is "good news everywhere you look": "The overall unemployment rate is only 3.5 percent; we haven't had that spirit here since 1969. Black unemployment is at a record low… [and] almost every measure of inflationary pressure I'm aware of has improved substantially over the past year, with no increase in the unemployment rate."

These results, and more, are proof that President Biden's economic plan to grow the economy from the bottom up and the middle out is working—powering a historic economic recovery that is creating good jobs that you can raise a family on and bringing more workers who have been left behind into the workforce.

Read the full story below:

New York Times (Opinion): The Meaning of an Awesome Employment Report
[Paul Krugman, 4/10/23]

Americans, they said, just don't want to work. Socialism has made them lazy. They'd rather play video games. They don't have the skills required by a 21st-century economy. High unemployment is "structural" and can't be solved with monetary and fiscal stimulus.

All of these stories received wide circulation during the long employment slump that followed the 2008 financial crisis and again in the aftermath of the pandemic recession. They were pushed by billionaires, captains of industry and prominent economists.

And none of them were true.

It may be hard for normal human beings — I'm sorry, I mean non-economists — to appreciate the awesomeness, the historic nature of last Friday's employment report. But the speed and extent of America's recovery from the pandemic shock have been incredible.

After the 2008 financial crisis, it took 12 years for employment rates to get back to pre-crisis levels. But only three years after Covid struck, employment is fully back for almost every age and demographic group.

Remember all that talk about Americans dropping out of the labor force? At this point the employed percentage of adults is at or above early 2020 levels for every age group except those 70 or older. (And they should probably get out of the way, anyway. Oh, wait, I'm 70.) The overall unemployment rate is only 3.5 percent; we haven't had that spirit here since 1969. Black unemployment is at a record low. There's good news everywhere you look.

So whaddya know: Provide enough job opportunities, and lazy video-game-playing Americans will take those jobs and, apparently, demonstrate enough skill that employers want to keep them.

Furthermore, it turns out that there are large benefits to full employment beyond the fact that people have jobs. Full employment also turns out to be a powerful force for equality, on multiple dimensions. The gap between Black and white unemployment is now a fifth of what it was when Ronald Reagan proclaimed "morning in America." A tight labor market has led to big gains for low-wage workers, sharply reducing overall wage inequality.

The big question now is whether the good news on jobs is somehow a mirage, based on an unsustainably hot labor market that will have to cool off drastically to contain inflation.

The Federal Reserve seems to think so. The most recent projections by the committee that sets monetary policy had unemployment rising to 4.6 percent by December. Last June Larry Summers predicted that we would need two years of 7.5 percent unemployment — more than twice the current level — to bring inflation under control.

On one side, average wages are now growing at an annual rate of less than 4 percent, not much higher than growth on the eve of the pandemic. That's not what you'd expect in a wildly overheated labor market. Even if you believe that the number is being held down by increased hiring in low-wage occupations — Goldman Sachs estimates that "composition adjusted" wages are rising at 4.2 percent — the wage data is fairly benign.

On the other side, unfilled job openings are still unusually high, which some economists believe points to an overheated market (although there are questions about both the reliability and the relevance of the job openings data). And various measures that try to gauge underlying inflation — a tricky business in an economy still sorting out pandemic-related distortions — mostly point to inflation of around 4 percent or a bit higher, well above the Fed's target.

But maybe the important point is that almost every measure of inflationary pressure I'm aware of has improved substantially over the past year, with no increase in the unemployment rate. And there's no hint at all of the much-feared self-reinforcing inflationary spiral, in which rising expectations of future inflation feed into current inflation. In fact, most measures of expected inflation have declined over the past year.

So there's good reason to believe that we can sustain the incredibly good job market we have right now, even while getting inflation under control. And it will be a real tragedy if exaggerated fear of inflation causes the Federal Reserve to push interest rates too high for too long, leading to a gratuitous recession that throws away many of the gains we've made.

Now, today's column isn't directly about politics, although people who insisted that we couldn't possibly hope to achieve full employment because American workers don't have what it takes tended to be on the political right. But it is worth noting that Republicans keep insisting President Biden's policies have been an economic disaster, and that even the mainstream news media has tended to emphasize inflation — which has been a nasty shock, even though it may be subsiding — rather than job gains.

So it does seem worth pointing out that at this point Biden is presiding over the best job market America has seen in a generation — specifically since the boom of the late Clinton years. And that, as Biden himself might (almost) say, is a big something deal.