After another bad jobs number what more can way say than “Welcome to the Recovery”? Meanwhile, the latest Congressional Budget Office projections will probably attract attention for what they say about the budget, but the budget is largely driven by the economy so it’s worth looking at the macroeconomic projections:
So in 2011 are we going to start closing that gap with NGDP growth of 6.5 percent? 8 percent? Nope. According to CBO, in 2010 we’ll see 3.8 percent NGDP growth and the gap will get bigger. Then in 2011, we’ll see 3.1 percent NGDP growth and the gap will get even bigger. Then from 2012-2014 we’ll return to the trend rate with an average of 5.6 percent NGDP growth and then catch up to the trend level . . . never.
Or you can just look at the inflation numbers. Whether measured by CPI or core CPE, they project that we’ll undershoot the 2% target this year, undershoot it again next year, then undershoot it on average for three more years, and then start doing some very very modest catching up in the 2015-2020 level. All this during an extended period of elevated unemployment. This is monetary policy malpractice. I think it’s an open question how much better things would be with more appropriate monetary management, but the range is from “a little better” to “much better” and those are both good options.