Do we expect the jobs that resulted from the housing boom to once again come to the rescue of low-wage Americans?
The run-up in home prices that triggered the jump in construction and local spending was relatively short-lived, and home prices have returned to the levels where one might expect them to be, based on the moderate price growth that has prevailed over many decades in just about every state in the Union. In New York, home prices grew at around 2.4 percent a year from 2000 to 2010, once you add up the 5 percent annual growth of 2000-07 and the bust that followed. This is not much different from the 2 percent annual growth that the state experienced from 1980 to 2000. Similarly, Nevada home prices declined slightly over 2000-10 despite the massive housing boom of the first half of the decade, just as they did during the years 1980-2000.
So just as we probably shouldn’t expect home prices to come roaring back, don’t hold your breath for a rapid recovery in employment—a lot of those jobs were already lost before the boom started, as a result of manufacturing’s long-term decline. This presents a bleak future for low-skilled Americans: declining job prospects and wages with no obvious reversal in sight. This isn’t anything new—Hurst and his colleagues emphasize that the housing bubble merely provided a brief respite from this steady drop.
Few economists feel that there’s much hope in propping up manufacturing businesses where they still exist—a lot of those jobs will continue to migrate to lower-wage locales. But at the same time, some leading labor economists are reasonably bullish on the long-term prospects for American workers—if we make the right policy choices to prepare them for the new global economy…
One of the main policies to reduce long-term unemployment is an active labor market policy. The OECD publishes each year data on Government investments in labor market programs like training and wage subsidies.
Gemany and the Scandinavian countries are champions of active labor market policies. This is well known. But, less known is the fact that the US are not. US investment in active labor market programs before the Great recession wasbelow the OECD average, nearly 4 times lower: 0.13% of GDP vs 0.48%.
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The International Labour Organization and the World Bank released a joint report and new online data tool with the first comprehensive stocktaking of countries’ jobs-related policy responses to the recent global financial and economic crisis. A follow-up to a request from leaders at the 2009 G20 Pittsburgh Summit, the report, Inventory of Policy Responses to … Continue reading »
“While I do not see much evidence of any significant increase in structural unemployment so far, I am concerned that structural unemployment could increase over time if the labor market heals too slowly–a phenomenon known as hysteresis” said Bernanke at the Money Marketeers of New York University, New York, New York, on April 11, 2012.
The U.S. labor market has been reeling since the onset of the Great Recession in December 2007. Public concern has largely focused on the unemployment rate, which rose to double digits and has stalled at more than 8 percent. This rate is unacceptably high, and macroeconomic policy efforts have been unsuccessful in bringing it down write Robert … Continue reading »