“For policymakers, let’s keep in mind this is not just a cyclical employment problem related to the severity of the recession but also a structural one,” she said. “Beneath the surface, we were seeing problems in terms of a hallowing out of certain portions of our labor market for the last ten years.”
Median household incomes adjusted for inflation, for instance, haven’t risen in ten years, she said.
“Some of the short-term fixes have been discussed widely,” she said. “The longer-term fixes have to do with raising the educational attainment level of the average worker in the United States.”
Meanwhlie, many investors are pricing in some concern about inflation rising, said Cohen, and extra capacity is one of the most important things that drives inflation over a longer-period of time.
“Capacity in the nation’s factories and mines depending upon industry is only operating at 70-75 percent,” she said. “But one of the areas that we have the most spare capacity, unfortunately is the labor market with a 17 percent unemployment rate when you include those people who are underemployed or discouraged workers.”
Cohen’s group has advised some investors to become more involved in commodities and some of the better opportunities next year may come from energy.