Economist Mark Thoma has a new blog over at MoneyWatch, and he's kicking it off with some interesting talk about unemployment. Today he asks whether there will be "a new normal" for unemployment once the recession is over. Here's a taste:
I expect structural unemployment to be higher than it was, particularly in the next few years. We had too many resources in housing, finance, and automobile production, and it will take time for the economy to make the necessary structural adjustments. When this is combined with continuing globalization, as well as the higher savings rate and correspondingly lower consumption expected from households in the future, both of which cause structural change within the economy, the expectation is that the new target rate of unemployment will rise above the 4 percent level it was at before the recession.
Exactly how much it will rise and for how long is hard to say. A 5 or 6 percent rate, or even somewhat higher is certainly imaginable, but getting it right is important.
Thoma says we aren't totally powerless in dealing with unemployment. He thinks job training programs could help match workers with available jobs.