Roubini : To manage unemployment, create 1,50,000 jobs every month
CNBC : You said we have to create 1,50,000 jobs every month?Roubini : Yes, because they not only will increase the labor force but the 1,50,000 workers and by the way we have lost 8.4 million jobs during recession including our cut is another equivalent to three million jobs. So we will have to create 3,00,000 jobs every month for the next three years to bring back the level of employment to what it was before recession started but that is not enough because you are adding another 1,50,000 people to the labor force every month. So it is another 4.8 million people in the next three years. Nobody believes that given these conditions it is going to happen anytime soon.
If you don’t create jobs there is no labor increment, there is no consumption growth and the risk of a double dip becomes worse. Paradoxically in the last few quarters there has been a switch of distribution of income from labor to capital and to profits and these profits are not being reinvested and firms are not hiring workers. What can we do is difficult, we are in a process of deleveraging which is going to occur for a while. What can we do?—I would try to subsidize the demand for labor. I think instead of having an investment tax credit that boosts even more capex spending, this capital intensive, I would do a temporary cut in the payroll tax for two years. If you want to increase demand for labor rather than demand for capital, I would do a payroll tax rather than investment tax like Obama has suggested. So that would be something that reduces their labor cost for the producers.
Nouriel Roubini, of Roubini Global Economics, shares his economic outlook with Richard Trumka, of the AFL-CIO, and CNBC's Maria Bartiromo.
