"The Only-in-America Output/Employment Breakdown"
Neil Irwin on the Fed’s new “beige book” on the state of the economy:
The economy “continued to expand moderately” at the end of last year, according to a new report from the Federal Reserve that shows a recovery that, although not rapid, is on track. [...] Add it all up, and the picture is an economy very slowly gaining momentum, with some continued pockets of distress but also definite signs of progress as 2011 gets underway. In the all-important labor market, for example, conditions “appear to be firming somewhat,” though not enough to push wages upward.
To put this in some context, I would suggest you read this post from Nick Rowe. But to steal the punchline, though by definition a recession is bad for GDP, in output terms the United States has weathered this recession better than most of our peers:
Only Canada does better. And of course the Canada-like portions of the United States—those with little overbuilding in the housing sector and/or valuable natural resources—are doing better than average. But how about employment:
Total, unmitigated disaster. And as Rowe points out this isn’t because there’s been some cosmic breakdown of the output/employment relationship, the breakdown is exclusive to the United States of America. To make monetary policy under the circumstances, you’d really want to know why this is. In the absence of a good explanation, if I were an FOMC member I’d say “damn the torpedoes, full speed ahead” and interpret this as meaning that the USA currently has the capacity to dramatically (albeit temporarily) increase its rate of real GDP growth. But actually FOMC members may well look at the fact that real output is doing okay, all things considered, and declare mission accomplished.