So, what does a jobless recovery today mean for tomorrow?
For one thing, it means that budget cutting and slashing by the States will continue around the country for at last another year or two (or even three), since the $70 billion that is still forthcoming to them from the February stimulus plan is but a third of their current overall budget shortfall of around $210 billion. And few things will be more de-stimulative into the medium term than these trashed budgets. It means that we haven’t seen the end of the rise in the savings rate, which has already gone from less-than-zero during the housing bubble to around 7% today and which now looks poised to increase to 10 or even 13% in the near future. In principal, as we’ve said, much more consumer savings than zero is a very good thing, and 7% would be a pretty good level to stay at. However, because of the pervasive uncertainty which a jobless recovery generates, a reasonable savings rate can quickly turn into an over-savings rate, which would be as de-stimulative into the long term as the nat
