Krugman’s blog, 8/4/17

There was one post on 8/4/17: “Structural Unemployment: Yes, It Was Humbug:”

It seems like ancient history now, but five years ago there was a remarkable Beltway consensus that high unemployment was structural, the result of a mismatch between the skills workers had and the skills the economy needed. What made this consensus remarkable was that all the evidence pointed the other way: none of the telltale signs of a skill mismatch, like rising wages for some groups despite high unemployment, were in sight. Meanwhile, lots of other evidence – like the fact that unemployment was falling fastest in the same places and occupations where it rose most – pointed to a cyclical story, that is, that the economy was simply suffering from inadequate demand.

Yet so strong was the groupthink that news analyses often presented the structural story as if it were the known truth, without even acknowledging the contrary case.

So here we are, with no obvious up-skilling of the work force, but with unemployment now below pre-crisis levels, with prime-age employment not too far below where it was, and still no wage pressure. People got mad when I called the structural story humbug, but humbug it was.

Why does this matter now? Well, the people who were sure that it was structural are still out there, opining on economic policy. And while we all make mistakes, is there any sign that any of these people have so much as admitted getting this wrong, let along learned from the experience?

No.  This has been another installment of SASQ.


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