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.