Hysteresis in unemployment
(the anti-Panglosses or we're not in Kansas anymore)

DeLong, Krugman, and Robert Reich say there may be a "new normal" in unemployment as long-term unemployment turns structural. Which is horrible news obviously.

DeLong notes what skeptical commentator Robert Waldmann of Angry Bear says:

David Altig Says That Our Cyclical Unemployment Has Started to Turn Structural: Shorter Brad DeLong:

Terrible news, there are lots more job openings in the USA than there were a year ago.

Huh? I'd say that job openings are good news. Would you rather there were fewer? One might imagine that high unemployment and high vacancy rates are, as you directly state, a bad sign as high unemployment combined with high vacancies lasts longer -- that the combination is a sign of hysteresis from a) deteriorated jobs skills, or b)deteriorated work habits, or c) irrational stigma due to employers assuming a or be or d) missmatch. I recall such a graph. It was the terrifying UK Beveridge curve from 1988-9 (look it up). The word (from among others Layard) was that unemployment had become almost impossible to fight as the long term unemployed were discouraged. Then employment took off.

The Beveridge curve is the lower envelope of a slightly more complicated dynamic with counterclockwise cycles above the curve.... My reading is that when the market crashed in 87, Thatcher panicked and allowed the (not independent) bank of England to stimulate. So the economy took off. It took a while to into work down the huge stock of unemployed, but there was no sign of a bad tradeoff. Just further proof that her insane policies (until she missinterpreted the crash of 87 as the crash of 29) were the problem.

Krugman shares your view and he does tend to be right, but still, I'm tempted to make a prediction...

As Waldmann says, it is not wise to bet against Krugman. I tend to agree with Waldmann though. We've been through the biggest crisis* since the Great Depression and it will take a while to get back to where we were even with government help.

The Senate and the Fed can and should do more to bring down unemployment more quickly. I doubt they will though. They feel the economy has stabilized and will grow "naturally."

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* If there's an upside to the crisis is that it smacked down the freshwater / laissez-faire / new classical economists who have been ascendant since the stagflation of the 1970s and had grown noticeably complacent.