You have to hand it to Paul Krugman: He does know how to absolutely madden his critics, the sorts of people who think that the Princeton economist and New York Times columnist is near demonic. Because Paul Krugman is stubbornly convinced that the current economic resurgence is no resurgence at all.
Here is his argument: In today’s column Krugman concedes that the unemployment rate of 5.9 percent — which he cagily calls the “measured” rate — isn’t that high by historical standards. But, he says, there is “something funny about that number”: an unusually large number of people have given up looking for work, so they are no longer counted as unemployed. And more measures apply, like the length of time it takes laid-off workers to get new jobs. Given all of this, Krugman argues that the gains are going mostly to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. Yes, those gains are going mostly to stockholders and executives, but he points out that while more than half of Americans own stock, most own very little, so they don’t participate.
Krugman’s points aren’t outright wrong, as certain of his tireless critics think. It’s just that he is walking very far out a very thin plank. What makes his non-boom hypothesis falsifiable? What level of job growth over what period would cause Krugman to turn tail and proclaim all’s well with the economy? Merely a return to historical norms? Why, then, the use of the word “boom”? Must the economy “boom” again for him to feel that prosperity is returning and growing?
After all, Krugman (like myself) was a staunch critic of the boom-bubble economy of the late 1990s, so it is peculiar, to say the least, for him to crankily complain that only another boom now would prove that the economy is finally back on its feet.