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The Battle of Alliterations

Robust recovery, double dip, new normal.

12:00 AM, Aug 7, 2010 • By IRWIN M. STELZER
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One reason offered is that the 6.6 million workers classified as long-term unemployed (out of work for 27 weeks and longer) are increasingly difficult to re-employ. For one thing, the industries that laid them off are unlikely ever to reach historic levels of activity, meaning that demand for their skills will never reach pre-recession levels. Besides, such skills as these workers do have atrophy from lack of use. Meanwhile, employers complain they can’t find skilled workers. No surprise according to Robert Shapiro, former economic adviser to President Bill Clinton. Shapiro estimates that 40 percent of American workers, and perhaps a larger portion of the unemployed, are “computer and internet incapable.”

Then there is the contentious issue of imports and of the continued overseas shift of manufacturing and, lately, service industries. In the long run, of course, consumers benefit from the lower-cost goods coming into the country, but Keynes’s view that in the long run we are all dead has great attraction to politicians in an election year. So borrow and spend remains the order of the day, supplemented by new taxes on “the rich” -- many of them small businessmen -- and on corporations, especially those with overseas operations.

Finally, there seems to be a disconnect between corporate profits and job creation. Some three-out-of-four companies that have reported second-quarter profits have “beat the street,” analysts’ jargon for exceeding expectations. But much of the increase in earnings comes from overseas operations, and much from cutting costs. No jobs-for-Americans in that.

Next week we get the reaction that really matters: from the Federal Reserve Board’s monetary policy committee. Instead of talk of exit strategies, popular when the robust-recovery advocates were in the majority, we can expect the Fed to take steps to print more money by adding to a balance sheet already expanded by $1.2 trillion during the recession. That, too, is part of the new normal. 

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