When will the job picture improve? Stiglitz offers bleak prediction

The prospects for a quick global recovery are bleak — mostly due to a lack of jobs, said Joseph Stiglitz, a noted economist at Columbia University. In a speech in Orlando, Mr. Stiglitz, winner of the Nobel Memorial Prize in economics, said it could be the middle of the decade before unemployment levels in the United States return to normal. “There are over 15 million people unemployed now in the United States, and that means one out of six Americans who would like a full-time job still can't get one,” he said. “We aren't growing fast enough to create new jobs for the new entrants to the work force, let alone to reduce the job deficit.” A big part of the unemployment problem, Mr. Stiglitz said, is that the housing slowdown continues to hurt the labor market. Globally, the picture doesn't look much better, he told attendees at the Investment Management Consultants Association's annual conference. Although Mr. Stiglitz identified Asia as “one bright spot,” based on vast untapped domestic markets, he noted that the level of consumption in Asia is too small to spark a recovery in the U.S. and Europe. Until recently, hope for an American recovery was based in part in strong export levels based on a weak dollar, because the U.S. had been winning the “negative beauty contest,” Mr. Stiglitz said. But that advantage is now tilting in favor of Europe, and the prospects of strong exports with a weak euro and a weak Europe are “very bleak,” he added. Mr. Stiglitz gave some credit to the government for trying to manage and respond to the financial crisis. Without the Obama administration's $800 billion stimulus package, he estimated that unemployment would have peaked at around 12%, about two percentage points higher than where it is now. However, Mr. Stiglitz criticized the administration's financial rescue plan because it didn't go far enough in overhauling the financial system. “The stimulus package was too small and not well designed, because it was based on the hypothesis that the economy had hit a small speed bump,” he said. “They figured they could repair the financial system and everything would return to normal.” One of the reasons the administration missed the mark on its stimulus package, Mr. Stiglitz said, is that “it was obvious the advisers [trying to fix the crisis] were the same people responsible for the crisis.”