On the Austro-Keynesian Exercise

Matt Yglesias is thinking through job losses by sector:


One is to underscore the oddness of Naryan Kocherlakota’s observation that “the Fed does not have a means to transform construction workers into manufacturing workers.” It’s true, they don’t. But the biggest source of job losses is that we’ve transformed manufacturing workers into unemployed people, and the Fed really should have a means to transform the vast majority of unemployed manufacturing workers into employed manufacturing workers.

And this is how it looks across the board. You do have a big hit to finance and a bigger hit to construction, but the combined finance & construction share of the job losses is less than 50 percent. The manufacturing, retail, administration, leisure & hospitality, professional services, and transportation sectors all went down when aggregate spending went down and have recovered weakly as aggregate demand recovered weakly.

Bracketing the broader question, I’d want to know more about the manufacturing job losses. If we imagine that deleveraging will prompt broader shifts in consumption patterns, e.g., a shift away from manufactured goods like domestic SUVs towards the use of sharing platforms like Zipcar or the purchase of lighter, more fuel-efficient, often-imported automobiles, might incline domestic manufacturing firms towards being very wary of taking on more staff. The strategy of shedding workers and raising productivity levels would make more sense, even if there were a medium-term effort to raise consumption through targeted tax credits, etc. 

Labor-intensive manufacturing seems particularly vulnerable to the kind of technological alternatives on offer, and a step-change like a deep recession followed by a sluggish non-recovery will presumably lead firms to be particularly aggressive about embracing those alternatives to better their competitive position. One is reminded of the the emergence of GM’s success relative to Ford during the Great Depression, as described in Accelerating Out of the Great Recession.

This isn’t to say that the Kocherlakota framework is right. But it’s not obvious that heavy job losses in manufacturing don’t lend credence to it. 

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

Most Popular

Film & TV

Why We Can’t Have Wakanda

SPOILERS AHEAD Black Panther is a really good movie that lives up to the hype in just about every way. Surely someone at Marvel Studios had an early doubt, reading the script and thinking: “Wait, we’re going to have hundreds of African warriors in brightly colored tribal garb, using ancient weapons, ... Read More
Law & the Courts

Obstruction Confusions

In his Lawfare critique of one of my several columns about the purported obstruction case against President Trump, Gabriel Schoenfeld loses me — as I suspect he will lose others — when he says of himself, “I do not think I am Trump-deranged.” Gabe graciously expresses fondness for me, and the feeling is ... Read More
Science & Tech

Set NASA Free

The Trump administration has proposed shifting the International Space Station from a NASA-exclusive research facility to a semi-public, semi-private one. Its plan would nix all government funding for the ISS by 2025 and award at least $150 million per year to NASA to help with the transition. This would be a ... Read More
Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
PC Culture

Kill Chic

We live in a society in which gratuitous violence is the trademark of video games, movies, and popular music. Kill this, shoot that in repugnant detail becomes a race to the visual and spoken bottom. We have gone from Sam Peckinpah’s realistic portrayal of violent death to a gory ritual of metal ripping ... Read More