What Happened To The ‘Bring Everything Back’ Function?

The U.S. labor market historically has been characterized by relatively short unemployment durations for an average worker. The high level of long-term unemployment we are currently seeing represents a sharp break with previous experiences. In the past, most job losses led to only short unemployment spells, as the labor market was able to quickly absorb newly unemployed workers into employment relationships. [emphasis added]

While not said much publicly, even Federal Reserve-underwritten scholarship was clear as to why this serious structural change had taken place (from 2013):

Recent research shows evidence of a modest increase in U.S. structural unemployment since the recession (see, for example, Daly et al. 2012, Elsby et al. 2011). However, this research also suggests that the primary explanation for historically high long-term unemployment is the persistent weakness in overall economic activity and demand for labor.

These two things become self-reinforcing and form one prong of the continuous deflationary anchor; though the R* crowd leaves out the first half of the process. In other words, skills erode, bad habits develop (leading to drug abuse and suicide), increasing lack of risk-taking, etc., which R* immediately blames on lazy former American workers when their own studies show such “laziness” came about first because the economy wasn’t nearly recovering enough to bring them right back into the fold as it had every other time during the six and a half decades before 2007 of the post-war, offshore dollar-expansion era.

The labor market didn’t spoil; it was left to rot by the ineffectiveness of policy responses to cure the underlying, unexamined issue which had actually broken the trend (permanent shock).

“Something” was very different about specifically 2008; a shrinking labor force was a new “thing” which began, poignantly, in October of that same year. If only we could figure out what was profound about that particular month. After all, Ben Bernanke was a hero and saved the world (and millions of jobs), so it must’ve been something else (sorry for the heavy sarcasm).

And now, as the month's pass, the increasing certainty that it’s happening again.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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