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Despite recent optimism about the U.S. employment situation, economist Joseph Stiglitz says the current state of the labour market shows that the economy needs more stimulus before it can return to full employment.In an article in the Financial Times Stiglitz says the labour market is still in shambles. 23 million Americans are out of a full-time job and there is a 15 million jobs deficit i.e. number of extra jobs needed to keep up with new entrants in the labour market.
At the current (225,000) pace of job creation, he says America can only return to full employment around 2025, which is longer than the Congressional Budget Office’s more ambitious target of 2018.
From the Financial Times:
With labour-force growth normally about 1 per cent per year and productivity growth about 2-3 per cent, it takes sustained output growth in excess of 4 per cent to bring unemployment down. No one expects growth at that pace for long enough to return the US economy to full employment any time soon.
We might, once deleveraging is finished, return to “normal” growth rates; but what is required to get unemployment down is an extended period of above normal growth. However, three elements of “missing demand” (missing, that is, compared with 2007) make that unlikely: then, the household savings rate was zero, a result of the top 20 per cent of Americans saving 15 per cent of their income and the bottom 80 per cent spending an abnormal 110 per cent of their income.
Read the entire article at the Financial Times.
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