Secular stagnation?

“Secular stagnation” is an emerging topic in macroeconomics.  It is most often associated with Lawrence Summers, who wrote a recent blog post on the subject: http://www.washingtonpost.com/opinions/lawrence-summers-supply-issues-could-hamper-the-us-economy/2014/09/07/274ce00c-352f-11e4-9e92-0899b306bbea_story.html.

Summers’ post notes that his conceptualization of secular stagnation looked mostly at the demand side of the macroeconomy (for example, the Zero Lower Bound on interest rates), but that others – he mentions Robert Gordon – emphasize supply side considerations, like an aging population and the end of large increases in women’s labor force participation.

What’s wrong with the unemployment rate?

Appelbaum notes that the unemployment rate is imperfect as a policy guide, but so are the alternatives: http://www.nytimes.com/2014/09/06/upshot/the-jobless-rate-the-worst-benchmark-except-for-all-the-others.html?abt=0002&abg=1.

A New Bias in the Unemployment Rate?

In the article http://www.nytimes.com/2014/08/26/upshot/a-new-reason-to-question-the-official-unemployment-rate.html?_r=0&abt=0002&abg=1, David Leonhardt reviews recent research that indicates that the unemployment rate has become increasingly inaccurate, because Americans are less willing than before to respond to surveys about their employment status. The reason and the solution both relate to technology, he asserts.

Labor Market Statistics and the Federal Reserve

An article in the New York Times (http://www.nytimes.com/2014/08/25/business/central-bankers-new-gospel-spur-jobs-wages-and-inflation.html?ref=business) discusses how central banks’ attitude towards unemployment has changed. Basically, central banks (the Federal Reserve in the United States and similar organizations in other counties) used to be concerned primarily with inflation. Now central banks are increasingly concerned with unemployment.

The article also mentions (and links to) a new 19-component index of labor market conditions (called the Labor Market Conditions Index [LMCI]). The new index – discussed at http://www.federalreserve.gov/econresdata/notes/feds-notes/2014/assessing-the-change-in-labor-market-conditions-20140522.html - is intended to give a holistic assessment of the labor market.

What are the main things included in the index? What elements are emphasized in the LMCI that were not part of the traditional overview of the labor market?

Unemployment and Labor Force Participation

One of the key things I emphasize in discussing the unemployment rate is that that statistic cannot be understood without context.  The context is what is happening with the labor force.  Unemployment is measured by the answer to a specific question about job search.  Many people who are not “actively” seeking work are still unemployed – they just fall into the category “not in the labor force” because they did not engage in the specific job-seeking activity in the relevant period.

This article by Annie Lowrey makes that point and others: http://www.nytimes.com/2014/01/22/business/states-cutting-weeks-of-aid-to-the-jobless.html?ref=annielowrey&_r=0.

To taper or not to taper - that is the question!

The blog post by Krugman points to the importance of the size of the labor force and changes in it in understanding unemployment data. Given his observations, what can sustain lower labor force participation in the long run?

The prospect of Larry Summers at the Fed

Here is an article that gives a variety of views about the expected appointment of Larry Summers to be Chairman of the Fed: http://www.nytimes.com/2013/09/03/business/as-summerss-odds-rise-stimulus-easing-is-seen.html?hp&_r=0