First of all, right now, the economy's fine, and this certainly isn't a bear market. GDP is humming along at a fine pace, the market's less than 10% off its recent highs, inflation is low, and, as many have suggested, unemployment is indeed a lagging indicator.
Now that doesn't mean that we don't have problems. We do. And they're big problems. You mention stagflation. While that certainly isn't the case here right now, the macroeconomic environment is truly ripe for stagflation. I happen to think that we either need to raise rates soon, or spending drastically, or possibly both, to avoid stagflation in the near future. On top of that, I think that inflation has been vastly understated recently. The main factor holding inflation back is the category "owner's equivalent rent", also known as the cost of your home. For some reason, the CPI doesn't reflect much of an increase in the price of a home over the past couple of years. I don't buy that at all. And that's about 40% of the CPI. In addition, the Fed's preferred measure, CPI ex-food and energy, is flawed. In the current environment, with dollar weakness being a primary source of inflation, commodities is the first place inflationary signs show up. For the Fed to ignore this in its primary considerations is folly.
And as many people have pointed out to you, employment does lag in a recovery. And, on top of that, outsourcing is costing us FEWER jobs now than it did one decade or two decades ago, in spite of the media wailing. (I personally think that all this recent wailing is because we're seeing white collar jobs getting outsourced now, versus blue collar jobs earlier.) In spite of all that, though, there is a real jobs issue right now. Sure, employment is lagging. But right now, it has been lagging for about 3 years. That is far too long to wait for jobs to come back, and is highly inconsistent with "normal" expansions.
Then again, the Bubble wasn't "normal" either, so we've got a lot of slack from that Bubble to soak up, and a lot of problems will result. The jobless recovery is just one of them. |
