"The head of the Minneapolis Fed, Narayana Kocherlakota, said the economy may be closer to maximum employment than the data indicate. If that’s so, well, to be blunt, that stinks. The labor force is barely growing, millions have just given up and quit looking for work, and wages are stagnant compared to inflation.
Structural unemployment, I have said repeatedly (including yesterday) is the Trojan horse issue of our time.
“Consider the implications for economic growth. The biggest problem isn’t necessarily government spending, although that is a problem, nor is it a loophole-ridden tax code, although that’s a problem, too. No, the biggest problem is that there are not enough Americans working and making enough money to pay taxes.
Strong economic growth would solve most of our problems. In a growing economy, the labor force is expanding, wages are rising, more people are paying more taxes (this isn’t an argument in favor of some socialist utopia. This isn’t a political debate. This is merely the reality of the situation.)
If this is maximum employment, we are sunk.”
I have been telling my readers as much since this blog’s inception. WSJ (or Fed) does not address why this is the case –technical change and trade with the BRICS.
This is why the Eurozone is utterly, completely, 100% screwed.
Q: If the US can’t generate growth then what series of reforms would be needed for the Eurozone to be on a stable growth trajectory? Exactly.
Its all about trade.