Monday, November 2, 2009

Amidst the Euphoria: Thoughts about Jobs and GDP

There are a number of items I want to bring to your attention today. One is in a separate post above, but these two deserve to be grouped together.

The first is an opinion piece from today's edition of The Wall Street Journal. The author points out that claims from or about any administration, and I underscore any administration about its ability to create, save, destroy is optimistic at best. Unless everyone is employed by government and in a very small economy, there is just no way to work through the details of every job to verify the claim. The best one can do in a very large, dynamic economy is look at net gains/losses in jobs. And even then, to claim success or blame failure on a specific program is questionable.

The second item is a post from John Taylor's blog. He does a good, short analysis of the recently released third quarter GDP numbers.

He attributes much of the improvement to changes in business inventories. He credits little to government stimulus, although I'm not sure about the stimulus package's impact on production of final goods and services. Using the C+I+G+(x-m) formula, the clear leader appears to be "C". If consumer spending is increasing, and business inventories are getting leaner. I would think that might lead to a turnaround in hiring, depending on productivity gains from existing labor. I agree with his overall analysis.  But as stated above, I'm not sure that means that any government program can be credited or faulted with economic performance in an economy as large and diverse as ours. For an administration to take credit, or for critics to find fault is to fail to grasp the complexity of the U.S. economy.

However, this will bear further watching, and should make for a lot of good examples for classroom use.

I welcome your thoughts.

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