Unemployment Will Get Worse

Nouriel Roubini is a better forecaster than most. His latest forecast is gloomy indeed. I don’t agree with his recommended policy response (more government stimulus), but that doesn’t change my respect for his forecasting.

Employment won’t improve until businesses believe they can invest more now to be profitable in the future. The outlook for business is especially murky since Washington’s agenda is full of items (health care reform, cap and trade, financial reform, etc.) which will dramatically change the rules. A business would be crazy to invest in such an uncertain environment, especially when the result of so many proposed changes would make profits harder to come by.

Roubini is right: people need to hunker down. And they may need to stay hunkered down until the job killing agenda of Washington changes.

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