I'd nominate:

1. Standard Unemployment rate. It's not a great measure but it's a start.
   
2. Unemployment rate  + discouraged workers + underutilised workers (US BLS U-6) rate. This tells you something about the quality of the jobs as well as the
   
3. Labour participation rate. Changes in this have to be related to the other measures. This can go down because people give up or because people don't need to work.
   
4. Real wage levels: if unemployment seems low and real wage levels aren't rising something is probably wrong.
   
5. Some mix of productivity rates and hours worked.

Examining regional data, Galbraith and Garcilazo found a correlation between wage inequality and unemployment. They also point to monetary considerations post-Maastricht as aggravating European unemployment.

Both points seem to me worth considering here.

Thanks for the link, KB.

a) There's only so many people on the Earth, so that's a limit to demand anyway.

b) In fact, lots of those people (e.g. parts of Africa, etc.) have next to no money, so they don't represent anything like the average level of demand for goods and services.

Thus, as productivity grows you can actually supply the needs of the entire interested world with less people. Effectively this is what has happened in the car industry. There are ongoing shakeouts because the viable market is saturated. Sure, there is a large potential market in China and India which could reverse this trend, but:

1. They don't have any money right now, so at this point in time the trend holds.

2. It's not a given that they will actually get hold of all that much money, is it?

The statement, in my opinion, can't be justified (nor can it be shot down).  It's not that productivity is independent of hiring.  A different way to look at it would be to say, "Well, my company's producitivity has jumped, so I can afford to hire more workers and produce more goods."  It's the investment decision that's going to determine the employment outcome.

I think we, in the West, are dealing with a period of uncertainty right now -- more so, perhaps, in America than anywhere else, but the effect is not lost on Europe, I suspect.  Productivity growth has been fairly strong in America over the last few years, but, as we all know, private-sector job growth has been a joke.

The reason productivity growth should lead to job growth is that it lowers costs, right?  But this is also coming at a time when there are tremendous opportunities in countries, like China, where lower wages can offset the lack of productivity.

I hope some of that made sense, because I'm about to fall asleep.

Be nice to America. Or we'll bring democracy to your country.

Of course, one complementary problem is that we're not sure the Earth can cope with giving everyone the ability to demand on the same level as US citizens.

The other question I have is that if the 1970s saw overcapacity coming out the fact that the US, Europe and Japan/Korea were all pumping out more goods than they could buy, doesn't this suggest there are major demand problems, even before you add China and India to the mix (who have much stronger supply than demand at the moment.)

It's not like you are ever going to be able to "prove" these things to everybody's full satisfaction anyway. This is not rocket science. It's harder.

The question is, are the conclusions plausible, and can we make reasonably rational policy recommendations from them? I think so.

In fact, the policy recommendations he comes to -- basically coordinated expansionary fiscal, monetary, and incomes policy -- do not seem all that far off from what the Alternative Economic Policy for Europe people are arguing for.

Blanchard would add some job-friendly institutional reforms of employment regulations, unemployment insurance, and so forth.

It seems like these could be the seeds of a traditional European business-labor-government grand bargain that mobilizes the whole society to combat unemployment.

Business would get some regulatory relief and wage restraint; workers would get guarantees from the government to create more jobs with macroeconomic policy and public sector employment, and active labor market policy to ease insecurity caused by the deregulation.

All negotiated among the social partners rather than imposed from the top, of course.

Will Blancahrd's recommendations head off the impact of the next oil shock?

Maybe I'm just too tired right now, but it's not clear to me that his ideas explain how to deal with an oil shock whilst it is happening, (rather than after it is done with) and yet everything Jerome posts points to an "expensive-energy" future at the moment.

One answer to this, as Blanchard points out, is that if one set of costs (say resource costs) are rising, other costs have to be stabilized if employment levels are to be preserved.

This can mean "incomes policy," where business, labor, and government get together to make sure that wage deals do not exacerbate inflation. Countries such as Germany that had this kind of system in place got through the 1970s better than countries that didn't, like Britain for example.