By Steven K. Beckner
Continued:
There’s no denying that unemployment has been driven up and kept
high more than three years after the declared end of the recession by
structural factors, said one participant, Bank of America chief
economist Mickey Levy.
As proof that mismatches are important, Levy noted that even
though recent Fed beige book surveys have shown weak labor market
conditions, they have also shown that firms are having “a hard time
finding the right, skilled people” in a majority of the 12 Fed
districts.
Levy also said government work disincentives are preventing
reductions in unemployment. He cited extended unemployment benefits,
“the unprecedented dramatic increase in disability insurance,” the
dramatic growth in the number of food stamp recipients and the
weakening of work requirements for receiving welfare benefits.
“All those factors inhibit growth and employment despite
unprecedented monetary stimulus,” Levy said.
Levy suggested that the structural-cyclical controversy presents
a false dichotomy.
“If something is not specifically structural, like extended
unemployment compensation, and doesn’t affect long-run potential growth
but takes five to seven years to return to normal, do you consider that
cyclical?” he asked.
Work disincentives and skill mismatches are suppressing short-term
growth and unemployment reductions without necessarily affecting
long-term trend growth, said Levy. “Why else would we have upward
pressure on real wages and not deflation. We have U-6 unemployment of
16%, but core inflation is 2%.”
(2 of 2)
** MNI **
[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$BR$]
