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We'll -- economy's been in the tank for years now unemployment still high middle class income has dropped housing market still a mess.
Why are we experiencing atypical post recession recovery.
But during the DNC convention I had chance to speak to former chairman of Obama's economic council of economic advisors Austan Goolsbee.
And -- that is the number one question is why this time why -- why are we not getting the recovery that we normally get.
After a recession.
Well you know actually it's not -- the recovery that you're describing isn't normal spent a long time since we had that in the recessions of the seventies and eighties and the time -- times before that.
Usually the reason you had rapid recovery is is because the economy go straight back to doing what it was doing before the recession began.
Starting with the 91 recession and then again in 2001 the recovery -- Are much more extended they don't have such as -- -- comeback and in the case of now.
It's pretty obvious she can't go back to building.
Houses and consuming.
More then you're earning which were the two big drivers of growth in the two thousands.
So you got to transform the economy and that's a much slower process than when you can just go straight back.
That's very good very good point in their -- and remember we talked about the jobless recovery that we talked about the real -- about more jobless recovery in 2000 so.
Is it demographics is it simply the fact the does.
Boomers were out there are going through our lives still still love of having families find homes find refrigerators and now.
Past that peak spending period.
There probably is some thing -- that bill that would them.
Does not as much the business cycle but there.
On both the labor force participation the fact that do that more people have dropped out of the labor force some component of that.
But is he's clearly due -- the aging of the population and -- as people get to retirement age.
And over the course of the life cycle you know the demand for housing is highest.
When it when you're in a period with small kids and as people get older they -- to downgrade in size.
So I think there is something to that but I think of the most important reason why.
Growth has been moderate.
As opposed kind of V shaped recovery look like they used to be back in the old days is this thing that keeps it if you can't go back to what you were doing.
It takes a long time and that's especially true when you have a financial crisis.
And people are trying to improve their balance sheets and get out from under debt.
All right we we have I guess you're describing this is basically were in to -- that the term is now being used to new normal.
There's a different economies -- how do you as an economist.
You know did you take all your data points from history and try and project what's gonna happen forward how do you do.
This because it's.
It's not to say I mean -- Partly it's that and you're right it's not the same -- I don't I don't actually subscribe to this new normal view because that makes it sound like.
Economists are saying that that's something permanent and I I don't think they are I think what what you get is.
What we had a housing bubble the biggest in the history of the nation.
And we got over bill we -- have we have five million vacant homes so of course construction which is normally a pretty sizeable component over recovery.
Is not going to be there because what's the point of building a whole lot of homes where there are five million -- ones.
But once you.
Big population grows went to work through that overhang.
Than it should come back to more normal times so the new normal.
Is not really a permanent new normal it's just period of transition.
And that period a transition.
You know kid it's it's a struggle.
Change of what the main focus.
Economy as well eight even President Clinton referred to in his speech this week of the DNC and that was this business about we've got millions of jobs that are open.
But aren't being filled because the skills they are not there to fill those jobs.
And yet -- immediately thought about defected to result hold graveyard full of training programs -- have been.
Not not being kind by saying they haven't been successful.
So how are we gonna do this transition to get people trained in these new jobs.
We start over well why don't.
EU do highlight there have been some types of training that have been very successful.
The more practical it is you know coming from Community Colleges where they have.
Sort of a public private partnership model so that the businesses.
Who actually would hire people.
Are quite centrally involved in designing the curriculum -- what the training program should be those tend to be much more successful -- ones where.
You know -- Department of whatever.
In the government of some state just decides -- everybody should be trained to be horse and buggy whip operator you know that some like that and it's clearly doesn't work.
I think the way we gotta do this is the private sector in the public sector got -- work together.
Historically we have had some success -- -- the US workforce.
Has -- now most productive.
And the highest still in the world.
For a long time it's only recently that that we've got to fall -- -- on that.
And I think.
We we're still at a -- where the overwhelming thing is the business cycle.
But within a couple of years some of these factors that that former President Clinton were talking about of the job vacancies.
-- able to be filled because -- skills are going to get more more important so valves a moment to be.
Investing in -- -- not cutting training I think what do you what everybody's waiting to see what the Fed's gonna do.
How are you handicapping.
I think they will do something that.
That could be described as QE3 like.
But I -- and I understand why look days.
The formulas tell you that the that the interest rate if anything should be negative.
The unemployment rates high there's no sign of inflation so loose monetary policy would be the order of the day but the interest rates -- -- zero so what are they gonna do.
The only thing I'd say is.
-- -- somewhat pessimistic that the Fed's.
Bullets aren't that effective you know I think they use most of their best bullets on QE1 in on QE do -- on the twisted so now we're kind of into the -- what remains.
They're doing some things but up.
Personally I don't anticipate -- having an overwhelmingly big impact are you worried are you worried about inflation from at least QE1 -- two.
Not there especially you know good.
In the old economic formula it's -- monetary base times the velocity of money.
Everybody that's looking at the monetary base -- saying all the look at how big that is they'll be inflation.
Is forgetting the other half of the equation the -- what do you -- down more.
Then the monetary base is up so there's no sign of inflation but what happens when that velocity picks up.
Well we know what to do as velocity start to pick up did you start undoing the QE1 in the QE2 I don't we know what to do.
In confronting inflation we really don't have a lot of tools to confront the inflation.
And it's extremely dangerous so I am not in the short or medium run at all worried about inflation I don't think the data backs that up at all all right.
Great to hear from -- Austan Goolsbee thank you so much for -- done.
Yeah -- great to see again.
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