In the cycles of a structural recession

The state of the economy has buzzed around all of our heads like pesky gnats on a stuffy summer day for over three years now, and it seems that the size of the swarm is only increasing in size and irritancy.  With an unemployment rate that doubled in the last three years and now barely falls short of ten per cent, many have voiced their responses and concerns with this condition. Business owners have expressed their reservations to hire and phrasings such as “trimming down” have taken on less comic proportions after the holidays than in years past. James Surowiecki of the “New Yorker” does a good job of breaking down the conversations surrounding the jobs crisis by demonstrating the two involved camps and their primary interests.

These two theories for the lack of employment consist of cyclical economic factors that can be simplified to the lack of fiscal confidence, and structural factors that comprise a more “skeptical account” and refer to the disparity between the available jobs and those available to fill those positions.  The logic for the latter position hinges on the crash of the housing market which in turn suggests that all of the construction workers who lost their jobs putting up houses would not be able to accept jobs in the Green Tech field. Several pieces of evidence speak against this situation however. One should see workers in the fields where work is available taking on larger workloads and pay raises, yet this has not proven to be the case. Not only the “bubble categories” of construction and finance have cut back, but all fields, extending to manufacturing, retail, wholesale, transportation, and information technology.

It still appears that the structural argument is unavoidable since, according to Surowiecki, a lack of confidence underlies every recession that necessitates the argument for a more extended period of unemployment that a cyclical interpretation does not concern itself with. This all to say that some critics will always rely on the structural narrative to explain economic downturns. Even so, regardless of whether or not many construction workers will need to learn new trades, the largest drop in consumption and investment since the Depression has quite assuredly contributed substantially to the 15 and more million unemployed.  So the two choices remain; let the economy heal itself, if at all, by bridging the gap between skill and need, or attempt to jump start the economy by restoring consumer and investor confidence through government action. Which argument do you prefer?

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