April 28, 2014

We should not ignore the contentment of the structurally unemployed when measuring economic recovery.

Sir, though surely a healthy economy requires quite a dose of confidence, Wolfgang Münchau is quite correct in that “Confidence is a poor measure if economic health”, April 28.

And I sympathize entirely with the idea that time like ours “when the economy is inherently unstable, when it does not return to equilibrium-the steady state around which [we at least believe] it should normally fluctuate… [makes] forecasting difficult and unpleasant.

But I am not fully convinced that “the employment rate as a percentage of the working-age population” would be the best way to measure whether an economy is recovering. And I say that because a recovering economy might also signify an increase in the contentment of many structurally or voluntarily unemployed. For instance a recovering economy, would perhaps provide for a better return on the savings of all those who have been hit by the double whammy of losing a job and not earning enough on their savings.

Also, focusing more on the contentment of the unemployed might have a very special significance, as there can be little as socially disruptive as the discontent unemployed.