The Noble Lie

Apparently a decision was made while I was sleeping to give this economic crisis the official title of "Great Recession." Does that mean this is the worst recession we've ever had? When does a Great Recession become a Little Depression? How do you find the world's tallest midget?

According to Bloomberg, "Full employment" will be redefined by the end of this "Great Recession." Even now, it probably doesn't mean what you think. "Full employment" means an unemlpoyment rate of 5.5%. If I'm not mistaken (and I very well could be here), "unemployment" means "collecting unemployment benefits," which means you fall out of the statistic as soon as your benefits expire.

'Great Recession' Will Redefine Full Employment as Jobs Vanish

May 4 (Bloomberg) -- Post-recession America may be saddled with high unemployment even after good times finally return.

Hundreds of thousands of jobs have vanished forever in industries such as auto manufacturing and financial services. Millions of people who were fired or laid off will find it harder to get hired again and for years may have to accept lower earnings than they enjoyed before the slump.

This restructuring -- in what former Federal Reserve Chairman Paul Volcker calls “the Great Recession” -- is causing some economists to reconsider what might be the “natural” rate of unemployment: a level that neither accelerates nor decelerates inflation. This state of equilibrium is often described as “full” employment.

Fallout from the recession implies a “markedly higher” natural rate of unemployment, says Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics. “It was 5.5 percent; maybe it will be 6.5 percent, maybe 7 percent.”

That has implications for policy makers as well as workers. The Obama administration and the Federal Reserve are counting on the jobless rate to fall to a medium-term equilibrium of about 5 percent as the economy recovers. A natural rate significantly above that would drive up the annual budget deficit -- which will top $1 trillion for the first time this year -- by reducing tax revenue and pushing up spending on unemployment benefits.

I used to listen to Alan Watt a lot, and one of the quotes he repeated often came from Margaret Thatcher's days as Prime Minister when she told Britons, "This is a generation which will never know employment, get used to it."

Now Americans are starting to get this same somber message, in our own particular media-friendly style.