Tag Archives: the Recovery

*Most* Signs Point to Continuing Recovery

The economy added a healthy 227,000 net jobs in February, marking the third consecutive month of job growth exceeding 200,000.  The unemployment rate remained unchanged at 8.3%, as the number of newly employed was essentially canceled out by those rejoining the labor force. Perhaps just as important, revisions to previous months’ numbers were significant: an additional 78,000 net jobs were added in December and January than was previously measured. All good news.

So will that continue? Some think we’re in for a few months of less than impressive growth in GDP, which would presumably result in a similar story for labor. Others aren’t convinced of that. Real gross domestic product involves a fair amount of inherent haziness, especially regarding productivity gains and losses. It’s just as likely that a shift in composition and geography of labor in some sectors could contribute to these future reductions in RGDP growth without sacrificing a commensurate number of jobs. For example, rising wages in outsource-destination countries, as well as further decline of the dollar, could lead to a repatriation of some jobs. Hence reduced GDP and more jobs.

A larger concern of mine, however, is one that many commentators share. Barring unforeseen oil induced shocks (ahem, dropping bombs on Iran…ahem), the biggest threat to a sustained recovery is an overzealous Federal Reserve. With core inflation hovering around the Fed’s now explicit target of 2%, it’s to be expected that inflation hawks on the FOMC will start getting louder. Moreover, we should expect certain prices to rise faster than some; an unabated recovery will naturally precipitate higher rent and gasoline prices. This shouldn’t be seen as distressing, although it certainly will. It will be the natural result of i) increased demand for oil as business activity increases and more people drive to work, and ii) pent-up demand for apartments and houses, which was subdued as a result of stagnate new household formation during the recession. There has at least been talk of QE3, or “Sterilized” bond purchases–which is a really informative and helpful thing to call it. If the Fed really wanted to put us over the top, this is the course of action they’d take, especially now. Expectations of QE3 are nearly nonexistent considering the recent improvements in the labor market and economy writ large. That’s why such a move would be unequivocal: the Fed stands behind this recovery.

While I don’t think that’s likely, it’s my hope that they’ll remain at least neutral, rather than tighten policy at a tragic time. There should be enough non-maniacs voting at FOMC meetings at any given time to prevent that.


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Is There a Hand to Take Hold of the Scene?

In lieu of another addition to the already countless, standard and grim analyses of the recently released BLS report on employment, which are, truth be told, the verbal equivalent of a extracted sigh, here’s a song by Okkervil River that describes my disposition toward the matter.

I’m almost certain that the past few years have been a scary movie in which the protagonist keeps going through that door. Except, in our case, the movie is being written, directed, filmed, and screened simultaneously by a large, unified bloc of people who don’t really care if the horror ends until sometime after 2012.

We need expansionary fiscal and monetary policy. The ARRA, also known as the stimulus, was an example of expansionary fiscal policy. However, the overall price tag was too small, not to mention the magnitude of the crisis was wildly underrated at the time of its debate and subsequent passage. Contrary to popular belief, though, and in light of these shortcomings, it performed as well as was expected by those familiar with Keynesian economic theory. We’re not going to get any more of the fiscal part of the equation mentioned above; here’s hoping the Fed gives us something on the monetary side later this month.

The album art even eerily resembles the global economy right now!

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