Jobless recovery

Rush Limbaugh said yesterday that he had never heard of that before - I wonder if he's ever heard of less than full employment or equilibrium without full employment. And I wonder even if he's ever heard those terms whether he understands them!



Yesterday's news wasnt great - jobless filings increased then the previous time period. So is jobless recovery possible? Yes - for sometime - when we start getting rid of inventories, and start using excess capacity without additional investment. Yes when we start becoming more efficient with current capital. When output starts increasing in some sectors but unemployment doesnt get impacted. There is always a lagged effect on unemployment and this will be expected.

Here are some indicators - housing starts increased slightly in Feb rel to Jan (1.6%) to (1.1%); US total business sales was up by 0.3%; retail and food services sales went up as did wholesale business. Needless to say the US trade deficit went up a bit indicating that the US is importing more than exports.



What does all this mean? That not only is the gap between actual output and potential output closing, but that the US may actually be having a slightly steeper potential output curve now.

The winter hath passed

Winter came and I went to sleep - when I woke up I found that tea party activists were overwrought, that Scott Brown could not prevent the health care legislation from passing and that the WSJ was even more radical than it was the year before. The stock of the President of the US is up as is the DJIA and other indexes. The economy is moving along slowly without creating jobs and the Yankees had won - no that I cannot digest.

Will this be a summer of discontent? Which summer is not in some fashion or the other? Let's see - many things are happening - Afghanistan, Poland, China, the World Cup (this will be Messi's year for sure), IPL in India, an Indo-Pak marriage and Gordon Brown may not remain PM until December 2010.