Holiday gatherings are a great time to gather with family and friends IF you are part of a semi-normal, functional extended family. Christmas Vacation is my favorite Christmas movie primarily because it thrusts the Griswold’s array of dysfunctional characters into our faces.
This Christmas I have found an even more discombobulated cast of characters to introduce you too – The family of Government Economists that are supposed to be helping our economy improve. The heated internal argument between Fed Chair Janet Yellen and Alan Krueger, the former chair of Obama’s Councel of Economic Advisors has spilled into the public arena. Hilary Clinton mentioned Krueger’s support for her minimum wage increase during the second democratic debate so Yellen and Krueger share the same political ideology. Friendly fire enhances the entertainment value as their tiff grows.
First a bit of background. As our country emerged from the great recession the biggest puzzle has been reconciling the steady decline in the labor force participation rate with the narrative of a strong jobs market. after 6 years of “recovery” some fo these workers should be returning to the labor market and seeking jobs. The problem is it just isn’t happening. Here’s the reality:
If you do the math, more than 94 million Americans are staying on the job market sidelines. Let’s put that number into some perspective. The total population of Germany is only 80 million people and their country produces more than 3.7 trillion dollars of GDP each year. Our economy needs these folks to find the motivation to get back to work.
The debate over why these workers are on the couch is the source of the feud between Yellen and Krueger. Professor Krueger published a paper in March 2014 in which he concludes that those who have been out of the labor force are not likely to re-enter it. Yesterday Yellen publicly called out Krueger’s assertion and this morning he wasted no time in jumping on CNBC to swing back and take a victory lap:
18 months after his paper was published, the labor force participation data supports Krueger’s analysis. These folks are still on the sidelines and show no inclination of returning to work. I’ll pick up the tab if these two want to go to dinner to discuss it: