We had Harvard professor Ken Rogoff on TechTicker today. Ken’s the dean of financial crises…
President Obama today unveiled several initiatives aimed at rebuilding the nation’s job market. Unemployment hovers at 10% as of November.
But our guest, top economist and noted bear Kenneth Rogoff of Harvard University, forecasts more headwinds. “It’s hard to see the kind of robust recovery that’s really going to generate the 10, 11 million jobs that we need to get back to where we were before it started,” says Rogoff, also co-author of a new book, “This Time Is Different: Eight Centuries of Financial Folly.”
While admittedly surprised by November’s stronger-than-expected jobs report, Rogoff predicts employment “comes back very slowly” and the unemployment rate will remain elevated for several years.
Rogoff and co-author Carmen Reinhart of the University of Maryland make the case that the “this time it’s different” argument doesn’t hold water, based on financial history. Too often boom periods are marked by excessive accumulation of debt and overspending, whether by consumers, banks or the government. Sound familiar? Indeed. And Rogoff says the current economic rebound is “eerily similar to average [recoveries] of past post-war crises.”
In a one-on-one with Aaron and Henry, Rogoff offers a muted short-term forecast for the U.S. economy:
- Jobs: Rogoff forecasts American worker incomes won’t return to peak levels until late 2011.
- Housing: The government is propping up the sector and real estate in fact still is declining “gently,” Rogoff says, not improving.
- The stock market: Many investors have been caught off guard by the rally since the March lows. But Rogoff says markets often return to peak levels two or three years are a crisis, as investors opt for riskier investments amid near-zero interest rates.
Plus, stay tuned for Rogoff’s thoughts on how to create American jobs and “make work” programs (such as those proposed today by Obama on highway, bridge and infrastructure projects).