Hey Guys,

I was thinking about the topic in the subject title of this post. Also, employment has been the predominant theme of this presidential election and it's all we keep hearing. Obviously ties into U.S. GDP.

During the booming from the mid-90s to the great recession starting somewhere around 2008, the unemployment rate ran between 4-6% with 5% about the average. However, now it is 8.2% and NFP reports haven't be great according to the media. But, is there a reason why the unemployment rate is so "high"? And that we can't consistently add 300-400K in a recovery? Is the US, and the rest of the developed economies, entering a period where peoples' expectations of what the unemployment rate should be change? Jobs are leaving the developed world and to the emerging world as it is more cost efficient and that isn't going to change as capital will continue to flow there. In addition, the leveraging up of the U.S. economy probably pushed the unemployment rate even further down. I know people have said that full employment in the U.S. occurs when the unemployment rate is about 4.5%. I think it is definitely higher and will stay that way, with the target rate around 6.5-7%. The global economy, and America's place in it, has shifted and I think this is the new full employment, thoughts?

Also, regarding GDP, people are upset with a 1.9% growth rate. Should our target GDP growth change from the 3.5-4% that people expect too? I believe if the U.S., as large as an economy that it is in a more and more competitive world, could grow at 2.5% each year on average we should be really, really happy.

In essence, what should our new expectations be for the unemployment and GDP growth rates?

fwiw the possible peak oil effects on GDP, (it might tie into unemployment)
• 1% decline in GDP per 1% decline in oil supply. (Robert Hirsh)
• Great depression 1930-1934 US GDP declined 24%
• 30% decline in oil supply in ten years following the end of the plateau in oil production at 5% per year implies a 30% drop in GDP in a decade.

ps ~70% of GDP is debt based consumer spending which is prob not a great measure of economic growth fwiw.

I heard prices dropped by more than 24% in the great depression. If the GDP dropped 24%, then overall the people were better off due to the lower prices for housing and food. I would not worry about a oil undersupply. I think we are in a oil oversupply as cars are getting more efficient and people are moving to the electric car which is just better. Japan just added a feed-in tariff for photovoltaics. lower oil prices also results in lower gdp.

From 1920 to 1964 the price of gas averaged about $.25 , a silver quarter. A silver quarter today is worth $4.93. Thus, gas is cheaper today.

If you're right, and I think it's very likely you are, we're going to have some social problems. The reality is that changing the employment rate from 4.5% to 8.5% is going to impact people near the bottom of the social strata much more severely than people at the top. One of the things that has kept the US so stable socially is the American Dream... What are we going to do when it becomes much more obvious that it's unattainable for a large number of people?

I'm not suggesting that we're going to have a socialist revolution or anything. I'm not some dingbat who thinks that things are going to get REALLY silly... But I think we're already seeing it in politics. I mean what is the Tea Party but a bunch of pissed off lower middle class white people who are watching their entire way of life sink like the Titanic?

Yes, social problems will come as the needs of people are balanced vs. our financial capabilities. Reform will have to happen in medicare and social security and other government programs.

But what does the community think full employment is and the subsequent GDP? I'm kinda curious on people's views and if they have changed. It would help shape how Americans view our economy.

The Tea party are not lower middle class.
http://www.nytimes.com/2010/04/15/us...cs/15poll.html

For old white people they sure aren't rich.

that's purely subjective.....it's not always about the mighty $

I was seriously considering starting an entirely new thread for this, but this seems like the right place to post the latest gloomy research from Carmen and Vincent Reinhardt and Ken Rogoff. Their assessment is that we could be in this economic funk until the year 2030.

http://www.nber.org/papers/w18015

http://mobile.bloomberg.com/news/201...crisis-strikes

http://seekingalpha.com/article/5829...e-for-how-long

I agree with BoredSocial. If we have a greatly extended period, (i.e. on the order of one or two decades), of subpar economic growth and high unemployment; there will definitely be political repercussions. Back in the 1930's people accepted economic hardship as God's will. Nowadays people have a much shorter fuse ...

If the traditional two party system appears paralyzed and incapable of making any progress against this credit and debt overhang, people will react in increasingly frustrated and strident manners. My first inclination was to scoff at Reinhardt, Reinhardt, and Rogoff's contention that the average duration of these periods of low GDP growth following a credit and debt overhang was 23 years. That couldn't possibly be right! However, hasn't the situation over in Japan, (i.e. the "lost decade"), been going on since 1989 or the early 1990's? If true, that means that Japan's "overhang" (or whatever it is) has been underway for over 20 years.

A depressing thought, but maybe Reinhardt, Reinhardt, and Rogoff are right.

Thanks for the reads Alan

Koch brothers though.

The Koch brothers are sociopathic billionaires who are manipulating those middle class old white people. They're exploiting their background levels of racism, ignorance, and anger to drive their own extreme right wing agenda. The Koch brothers are putting up the money to make sure the tea party remain very well funded, but that hardly makes them representative members of that movement.

Koch brothers are my heroes. They give me the choice to buy their products. Unlike the government that takes from the poor and gives to the rich (schools and unions). The reason why there are so few jobs is because of government. End unions, end minimum wage, and end our present national health care will lead to a better life for the poor.

Steeeeeeellllhouuuuuussssseeee

Anyone have academic search capabilities? i lost mine since graduating UW. but i know there was some work on showing the new disconnect between gdp/unemployment as FIRE (financial, insurance, real estate) grew to become a larger porition of GDP. As an econ major i should know the name of this (okuns law?!), but i would be curious if anyone can find more current papers if theyve developed a more concrete model rather than the 1% negative delta gdp=3% unemployment delta