April 9, 2004

#153: Whistling past the election year graveyard..

P. Krugman

Paul Krugman in One Good Month (04/09/04) finally addressed the good news contained in last week's employment report – 308,000 new payroll jobs in March plus upward revisions in the January and February reports. But he punted on the report's implications for the future by taking a wait and see approach as to whether it continues. In other words, he whistled past the election year graveyard.

Three points are worth making:

The improving job outlook is the LAST piece of a strong economic picture to fall into place. Every OTHER indicator from GDP growth to inflation to interest rates has been outstanding for some time.
The reason jobs growth is important is that it becomes self-sustaining. The income generated by new jobs supports consumption spending and takes the pressure of the on-time policy stimuli, e.g., tax cuts. Krugman has made this point many times himself. Interesting he avoids it now.
The recovery underway in the US is not only strong itself, but is synchronized with most other large economies around the world. This is an uncommon occurrence and bodes well for the next several years as growth begets more growth.

Krugman and the Democrats just keep on insisting that the economy is weak in the face of mounting evidence to the contrary. And why not? Polls show they have done an amazingly good job of convincing people that economic their lives are precarious and that an Indian out-sourcer is lurking around every corner. It will be very interesting to see how long they can keep it up.

[The Truth Squad is a group of economists who have long marveled at the writings of Paul Krugman. The Squad Reports are synopses of their discussions. ]

Posted by John Weidner at April 9, 2004 10:22 AM
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