Explaining Southern California's economy

Does a new econ guy in the White House mean a new hope for jobless California?

We can always hope so. Princeton economist Alan Kreuger was just nominated by President Obama to head the Council of Economic Advisers, the three-person team that provides know-how on the economy to the chief executive. 

This move has been taken as a sign that Obama intends to get serious about unemployment. As the LA Times' Opinion L.A. blog points out, Kreuger is known for his work on labor issues:

Perhaps the research most relevant to his new post…is the recent work he did with Andreas Mueller of Stockholm University examining the efforts by unemployed people to find new jobs. Among their findings: People spend less time looking for work each day the longer they are unemployed, but they don't lower their wage demands significantly over time. This is especially true for younger workers, for whom the long-term cost of a big cut in pay is more severe than for an older worker closer to retirement, the study found.

At his New York Times blog, however, Paul Krugman -- a Krueger colleague at Princeton -- suggests that the President's choice is more than just a jobs guy

I gather that there’s some commentary to the effect that Alan is a labor economist rather than a macro person like [former CEA Chair] Christy Romer, and that this means less emphasis on actually increasing demand and solving the slump...I think that may be reading too much into it. Alan may write about labor markets, but he knows macro and is pretty salt-water and activist by inclination, as far as I know. His advocacy of job tax credits comes from an attempt to work within political constraints, not lack of interest in more decisive solutions. And I think the administration was looking for a high-profile, first-rate economist willing to take the job, rather than tilting toward a particular field.

That may be the case, but California, with a 12 percent unemployment rate, could use a jobs-focused specialist with access to the President. Especially because our own chief executive, Gov. Jerry Brown, has admitted that the state doesn't have the means to combat the unemployment crisis. From the San Francisco Chronicle:

Even Brown downplayed the impact California could have in revving up a sputtering economy that is at the mercy of international forces.

"We've got the plan Obama has been looking for. And if you believe that, I've got a bridge to sell you, too," Brown said. He added later, "We'll do what we can at the state level. The state is a different kettle of fish than the nation. We don't have the Federal Reserve, we don't have the instruments of massive fiscal capacity that the United States government has."

He makes an excellent point. California may have the world's eighth largest economy, but it's at the mercy of national -- and increasingly, international -- economic forces. Unemployment is our number one problem. So any sign of help in Washington is a welcome sign, indeed.

Photo: Department of Treasury

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