In the previous article, I briefly laid out the case for a jobless recovery in the short run. However, despite the immediate pain, it has positive long-term consequences.

  • The federal government has more time to fix the entitlements issue with regards to the boomers. Their accumulated skills and experience are necessary in the workplace, and with last year’s market decline, they have a stronger incentive to work–and pay taxes–than retire–and draw entitlement funds.
  • Greater investment in capital will allow us to achieve the same level of production using fewer people, or equivalently, more production using the same number of people.
  • The above, combined with our lessened propensity to consume, will help lower (or perhaps altogether eliminate) the trade imbalance (net exports)
  • The savings rate going back to a more normal level will help investments in future growth

Perhaps the US will be in a less unsustainable path of unbridled consumption after this transformation.