A thought for Sunday: when will Happy Days be Here Again?

 - by New Deal democrat

My overarching theme about the economic news for the last 5 years is that it has been "positive, but not good enough." Hardly like striking up "Happy Days are Here Again," as claimed by a few Doomers.

But in the last year monthly job creation has run over 200,000, and the unemployment rate has dropped below 6%.  While the economy is by no longer awful, it's really only doing so-so. Involuntary part-time employment, and the number of truly discouraged workers remain high. And wage increases still stink. 

So, I thought I would lay out what would really cause me to think the economy was downright good?  I came up with two levels.

First:

• U-3 unemployment below 5%
• involuntary part-time employment of persons below where it has been in the past with 6% unemployment (about 4% of the labor force, or about 500,000 fewer persons than now)
• people out of the work for but who want a job now equal to where it has been in the past with 6% unemployment (about 5.75 million people, or about 600,000 fewer persons than now)
• nominal wage growth of 2.5% YoY or more
• real wage growth of 1% YoY or more
• continuing job creation at 200,000 a month or more

If those things happen, the economy is doing pretty good but not great.

Second:

• U-3 unemployment below 4.5%
• Involuntary part-time employment of persons below where it had been in the past with 5% unemployment (about 3% of the labor force, or about 2.1 million fewer people than now)
• the number of people out of the work force but who want a job now equal to the number in the past with 5% unemployment (about 5 million, or about 1.4 million fewer than now)
• nominal wage growth of 3% YoY or more
• real wage growth of 1.5% YoY or more
• continuing job creation of 200,000 a month or more

If those things happen, you can begin to strike up the band.


There's a pretty good chance that we pass the first test this year. It's not clear we will ever pass the second in this economic expansion.

And of course, even if the current economy were going like gangbusters, that still wouldn't solve the long-term problems of income inequality and institutionalized barriers to children being able to overcome the US's increased class stratification.