Stowe Boyd2. Today's economy is too complex to be divined by intuition or algorithm, because we don't know which of the hundred million factors impingingSee more on markets are the most important, how they influence each other, or how the relations between those factors are changing.
Stowe Boyd> Productivity is one of the most important yet least understood areas of economics. Over long periods, it is the only pathway toward higher levelsSee more of prosperity; the reason an American worker makes much more today than a century ago is that each hour of labor produces much more in goods and services. Put bluntly, if the kind of productivity growth implied by the new data published Thursday were to persist indefinitely, your grandchildren would be no richer than you.
Stowe BoydThe Fed has a shorter lever to hoist the economy when the base postnormal inflation rate is half what it used to be:
> the American economy appears to have changed in a way that undermines the effectiveness of monetary policy but not fiscal policy, which may need to be wielded more actively.
> All of this is the result of two broad trends. First, inflation is lower than in the past. From 1950 through 2011, it [averaged around 3.5 percent.](https://fred.stlouisfed.org/series/CPIAUCSL) In January 2012, the Federal Reserve [committed ](https://www.federalreserve.gov/newsevents/pressreleases/monetary20120125c.htm)to a target of 2 percent, and actual inflation levels have been even lower.
> Second, the real (inflation-adjusted) interest rate consistent with the economy operating at its full potential has fallen, a trend that the Harvard economist Lawrence H. Summers called "[secular stagnation](http://larrysummers.com/2013/12/15/why-stagnation-might-prove-to-be-the-new-normal/)." Most [estimates](http://www.frbsf.org/economic-research/publications/economic-letter/2017/february/three-questions-on-r-star-natural-rate-of-interest/) suggest that this "neutral real interest rate" has dropped from around 2.5 percent to 1 percent, or lower.
> Put these pieces together, and a conservative guess is that in "normal times," the nominal interest rate --- the neutral real interest rate plus inflation --- has fallen from around 6 percent to 3 percent.
> That creates a serious problem for the Fed. Here's why: Most recessions can be cured by lowering rates by several percentage points. When interest rates were closer to 6 percent, the Fed could lift the economy with plenty of interest-rate leeway.
> But when normal interest rates are closer to 3 percent, the Fed can cut rates only a few times, because rates can only go so low --- perhaps as low as zero, [maybe a tad lower](https://www.brookings.edu/blog/ben-bernanke/2016/03/18/what-tools-does-the-fed-have-left-part-1-negative-interest-rates/). This means that in even a typical downturn, the Fed may be unable to cut rates as much as it would like.
> Even worse, this limit is a far bigger problem when an economic downturn follows closely on the heels of a previous recession. Right now, for instance, the central bank's main short-term rate, [the federal funds rate](https://www.federalreserve.gov/monetarypolicy/files/monetary20170315a1.pdf), is still only three-quarters of a percent to 1 percent, because the Fed wants to continue stimulating the recovery. This leaves the central bank with very little room to respond if the economy falters. Even a minor slowdown now could require a larger rate cut than is feasible, once again leaving policy makers wishing they could do more.
> This dynamic can feed on itself. The less ammunition the Fed has to blast the economy out of its malaise, the weaker and slower will be the recovery, making it more likely that the next bad shock will require the Fed to cut rates more than is feasible.
> The problem is that a lower bound on interest rates creates a sharp asymmetry in how the economy works: It’s relatively easy for the Fed to cool an overheating economy by raising rates. But when the economy is already cooling down, the central bank may not be able to cut rates enough to prevent a recession or to spur a strong recovery. Downturns will be deeper and more common than upswings. This means that, on average, output will be lower than it needs to be — perhaps more than a percentage point lower — and inflation will be lower than the Fed’s 2 percent target. Joblessness will be more common, particularly during slumps.
> It is crucial, therefore, that macroeconomic policy adjusts to these problems before the next downturn hits.
> Perhaps the answer lies outside the Fed. It may be time to revive a more active role for fiscal policy — government spending and taxation — so that the government fills in for the missing stimulus when the Fed can’t cut rates any longer. Given political realities, this may be best achieved by building in stronger automatic stabilizers, mechanisms to increase spending in bad times, without requiring Congressional action.
> There’s an opportunity to wed this to President Trump’s desire for more infrastructure spending. Rather than building more roads today as the economy approaches full employment, we should spend more when the economy is weak and the Fed is unable to provide enough stimulus. One way that this could be done is by automatically increasing the Highway Trust Fund when the federal funds rate hits zero and perhaps ramping up spending the longer that rates are stuck there. More roads would be built when they do the most good for the economy.
Stowe Boyd> The number of working-age Americans who aren’t in the workforce has surged to a record 95 million, up almost 500,000 in the last month alone, with many of these being factory workers.
> Yes, there are 95 million working-age Americans no longer in the workforce. The Great Displacement is already here and is set to accelerate.
> High rates of unemployment are linked to higher rates of substance abuse, domestic violence, child abuse, depression and just about every other social ill. Despair, basically. Note the recent spike in drug and opioid overdoses in the U.S. If you care about communities and our way of life, you care about people having jobs. This is the most pressing economic and social issue of our time.
Stowe Boyd> More people than ever are dissatisfied enough with their current jobs to want to consider other opportunities. Over the past few years, LinkedIn See morehas estimated that figure at anywhere [between 45%](https://www.fastcompany.com/3066700/the-future-of-work/how-youll-search-for-a-job-in-2017) and [60%](http://www.economist.com/news/business/21612191-social-network-has-already-shaken-up-way-professionals-are-hired-its-ambitions-go-far) of its more than 400 million users. Some [recruiters believe](https://business.linkedin.com/talent-solutions/blog/2013/12/recruiting-active-vs-passive-candidates) these so-called "passive jobseekers" now comprise up to 75% of the overall workforce. Just imagine if three out of four people in long-term relationships were still holding out for a better option to come along.
Stowe Boyd> It must be noted that emotional labor is also very often gendered labor. It was by no coincidence that Hochschild, a woman, coined the term and initiallySee more saw her research taken up most seriously in feminist circles. According to the [U.S. Bureau of Labor Statistics](https://www.bls.gov/cps/cpsaat11.htm), women make up 95 percent of all secretaries and administrative assistants, 93 percent of flight attendants, 73 percent of cashiers, 70 percent of waitresses, 66 percent of hotel desk clerks, and 65 percent of customer service representatives.
Stowe Boyd> Rosenblat and University of Washington law professor Ryan Calo recently released a well-timed [working paper](https://papers.ssrn.com/sol3/papersSee more.cfm?abstract_id=2929643) that examines the power imbalance intrinsically created when sharing economy platforms mediate transactions between two discrete groups of users (often buyers and sellers or service providers).
Stowe Boyd> One misconception about remote work is that it hinders collaboration. In my experience, the inverse is more likely: offices hinder independent workSee more. Collaboration tends to happen in short bursts, followed by longer periods of writing, designing, coding and thinking. It’s more important to give employees quiet time than it is to cram them into an open office.