When the Labor Department reported a significant drop in unemployment last week to 8.8 percent, it was thought to be an encouraging sign that the economy was improving. Even President Barack Obama noted the report as progress. But the White House shouldn’t celebrate just yet according to New York Times columnist Paul Krugman.
Krugman, one of the leading liberal voices on economics, appeared on Sunday’s broadcast of ABC’s “This Week” and explained why people shouldn’t get too excited over the data.
“It begins with a sigh because look, this is better than not, right?” Krugman said. “Better than no jobs but that unemployment — unemployment is a funny number, unemployment. You’re only considered unemployed if you’re actively looking for work. So if you look over the past year at the unemployment rate, it has come down a lot, significantly anyway. But that’s basically almost all because fewer people are looking for work.”
While some of the learned within the Washington, D.C. intelligentsia are attempting to use these numbers to gauge what things mean politically, Krugman cautioned against taking a victory lap just yet.
“It’s still terrible,” Krugman said. “It’s still a terrible job market. It’s not deteriorating, but there’s still five times as many people looking for jobs as there are job openings. And it’s still — the length, the average duration of unemployment hit a new record. So we’re in a situation where things are not getting worse, or at least not getting worse in all dimensions.”
Washington Post columnist George Will managed to find a silver-lining in that there has been a reduction in the size of government. However, he also noted that progress could be impeded with a shift in monetary policy in coming months, reducing the amount of Treasury debt purchased by the Federal Reserve.
“Actually the good news within the news is there are 14,000 fewer people working for government in the United States,” Will said. “State and local governments shed jobs. But the corollary of what Paul just said is that when the economy picks up and people become encouraged to go back into to some jobs, you can have the economy rising and unemployment rising simultaneously. We lost more jobs in this great recession than the last four recessions combined. Now we have had for 28 months essentially zero [percent] interest rates. The quantitative easing – the printing of money that began in November, under this, the Fed – the Federal Reserve Board has been buying 70 percent of the new issues of Treasury debt. That ends in June.”
Krugman was not optimistic about policymakers willingness to do anything going forward to improve the jobs picture.
“I would just say that the aftermath of a terrible financial crisis — this was the worst financial crisis since the 1930s, is always a prolonged period of weak growth,” Krugman said. “And the tragedy is that Washington has given up on the jobs picture. It’s not a failure of policy. I think the policy were undertaking made things less bad than they would have been but here we are still with a terrible unemployment rate, 37 weeks the averaged unemployed person is unemployed. And no interest in Washington about doing anything that would create jobs.”