Wednesday, July 06, 2005

Are we near full employment?

PGL asks whether or not we are currently at "full employment". If we are not, he continues, why is Greenspan raising rates?

This is a tricky question. The graph he shows which has employment from 1995-2005 is totally bogus. I was alive and concious in the mid to late 90s and I recall this thing called the "internet bubble". All kinds of people were in all kinds of jobs they really had no business being in. When the bubble popped they went back to grad school, or home to have families, or whatever, but their presence in the labor force was a temporary aberation that has since passed. So, using that period as some kind of benchmark is bogus.

On the other hand, wages have not risen in line with corporate profits, suggesting that jobs are scarce in the employment market, not workers.

At any rate, Greenspan is raising rates because there is a "liquidity glut" (whatever that means) which is manifesting itself as a real estate bubbble.

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