Arnold Kling  

Forecast for a Minsky-Jones Economy

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The Wall Street Journal reports:

The Monster Employment Index surged in February, with increases across a range of geographies and job categories, suggesting that employers are starting to emerge from a long hibernation. The Index, compiled by online job service, grew to 124 from 114, the highest reading since December 2008 and the largest month-over-month increase since the company compiled began the index in 2003.

In a Minsky economy, firms rely on profits for expansion. In a Garett Jones economy, firms expand in order to add capability, not to increase output.

For the last six months, the economy has been characterized by what Keynesians call a breakdown in Okun's Law. Basically, firms have been cutting workers, maintaining output, and generating profits. For a Minsky-Jones economy, this means that they are poised to expand. That is why I am more optimistic than standard forecasters for the next six months.

The standard forecast is, "employment has been less than what we expected, so let's assume it will continue to be less than expected." My forecast is that the recalculation is just getting started, and we will probably see employment growth of 200,000 jobs a month, or perhaps more, for the next year. Note that I make no bets about tomorrow's numbers.

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COMMENTS (4 to date)
Les writes:

I would agree, but there is a lot of job-killing legislation waiting in the wings:

Cap and Trade
Card Check

If and when some or all of the job-killing legislation is enacted, it could easily derail employment growth.

green_genes writes:

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wlu2009 writes:

Les makes a good point. Even if the impact of said legislation on employment is less negative than some think, how many employers are waiting to commit to hiring because of the uncertainty? This has to be driving some of the hibernation. I'd bet that if health care dies once and for a all you see a large uptick in pent-up demand for labor.

Doc Merlin writes:

Hrm, the minsky-jones fits the model I have been building... Nifty

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