Catherine Rampell has a nice graph that well illustrates the “depth” of the problem.
The following pictures could help assuage the worries of those that see inflation everywhere, and actually believe that “expansionary” monetary policy could harm employment by stoking inflation.
The pictures, depicting all the recessions since 1981, give out one clear information: until nominal spending growth is strong enough to close the “spending gap”, employment does not rebound. Also, higher spending catch-up growth does not ignite inflation.
The picture for the 2007 recession shows that given the size of the drop in spending, the “hole” to be closed is much bigger, and spending growth is far short of what is needed. But many are worried about inflation!
Jobs, where are you? – 2 (“Please come back”)
João Marcus Marinho Nunes
Fri, 06 May 2011 18:49:11 GMT