Economists say Treasury forecasts too rosy

Stuff reports:

Treasury’s forecast for employment are unrealistically optimistic and would require bosses to hire 189,000 jobs in short order to get back to pre-crises levels of employment, economists say.

Evidence from the last financial crisis shows it actually takes many years to get unemployment back to pre-crisis levels — and the financial crisis was a much smaller shock than the one now facing the economy.

Infometrics economist Brad Olsen says the forecasts are wildly optimistic and don’t take into account vast structural changes going on in the economy, such as the end of international tourism. …

Olsen said during the Global Financial Crisis (GFC) it took 14 quarters for employment numbers to fall back to pre-crisis levels. Treasury thinks unemployment rates can fall back to rough pre-crisis levels in just eight quarters, despite the Covid-19 shock being far more severe.

During the GFC, about 60,000 needed to be created to get the unemployment rate down. This time around, Treasury expects roughly 189,000 jobs to be found in a much shorter space of time.

Put like this, it seems very unlikely.

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