Roubini is back!
After a summer of mixed messages, he’s now firmly back to stark warnings, most recently sounding the alarm about a massive bubble due to the dollar carry trade.
And today in the Daily News he has some bad news for the unemployed: the worst is yet to come.
Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.
So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.
There’s really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labour-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.
The current recession notwithstanding, Roubini is of the view that unemployment is now a permanent condition, in part due to the outsourceability of so many jobs (that’s interesting, because it seems like an attack on free trade, which is somewhat new for Dr. Doom; that being said the increase in unemployment is part of a long, long trend from before the recession so there’s something to this).
What’s Roubini’s answer? Massive fiscal stimulus, and “bold policy action,” the likes of which Krugman advocates.