Chairman Bernanke's testimony today underscored the fundamental lack of sustainability of the growing federal budget deficit, while simultaneously defending the large increases in deficit spending that were necessary to support economic recovery. Bernanke predicts real GDP to grow at 3.5% over the course of 2010, yet he acknowledged that this must be tempered by latent problems in the housing market.
Yes, today’s employment news from May is disappointing – even though there are some encouraging signs.
Let’s start with the bright side: the unemployment rate edged down (to 9.7% from 9.9% in April, a lot better than the 10.1% high of last October); job creation was positive for the fifth month in a row (it has been increasingly positive every month this year); and the job number was what we like to hear (+431,000). So, more people are working now.
Today's May jobs report was a surprise to many economists, who had expected stronger private sector gains. Government-hired Census workers accounted for over 95% of the new jobs; and construction jobs were weaker than anticipated. What does the job report tell us about job gains ahead - is the job market strengthening or weakening?
Sometimes daily observation helps to answer tough economic questions.
Jeanne Sahadi wrote for CNN today on the sometimes-overlooked short-term perils that the growing US debt could create, and how they affect the average American today. Our debt can be linked to slower economic growth, higher interest payments, scaled-down government services, and higher inflation. The problems created will be more difficult to address—and the choices will be harsher—the longer that lawmakers take to deal with this problem.
Here are the highlights from this weekend’s editorials on fiscal and budget policy:
The OECD (the Organization for Economic Cooperation and Development, the Paris-based think tank for the 31 richest countries) released its twice-a-year economic outlook yesterday. It presented a bleak fiscal picture for many of the member countries (including the United States) unless governments make policy changes, but, constructively, it also presented possible ways forward for countries to get their fiscal house in order.
Larry Summers gave a very interesting and thoughtful talk in Washington recently (May 24).
But it was delivered in High Oracular Econospeak, so many people may never get it.
And reasonable people can come away with very different interpretations of Dr. Summers’ High Oracular Econospeak.
Throughout the week, U.S. financial markets continued to be dominated by a global market “flight to quality” in response to perceived EU policy weakness in addressing the Greek and eurozone fiscal crisis.
U.S. markets continued to be dominated this week by the continuing roller coaster ride from the Greek (and eurozone) debt crisis. More positive U.S. economic news appeared to be less important. The cause of last week’s stunning drop and subsequent recovery in the U.S. stock market is still not well-understood.
It wasn’t enough that we had a lot of impressive economic news this week (including today’s solidly positive employment numbers – even though structural unemployment remains a huge problem). It appears that the recovery is finally on track, although perhaps subpar compared to other recoveries. Moreover, structural unemployment will remain a tough nut to crack for awhile.
But US markets did not on balance reflect the good economic news.