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Thread: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    from the imf's april 20 report:

    "if the legacy of the present crisis and emerging sovereign risks are not addressed, we run the very real risk of undermining the recovery and extending the financial crisis into a new phase”

    IMF Survey: Government Borrowing Is Rising Risk to World Financial System

    well, isn't that interesting?

    unfortunately, the "legacy of sovereign risks" is NOT being "addressed"

    you know what that means...

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by The Prof View Post
    from the imf's april 20 report:

    "if the legacy of the present crisis and emerging sovereign risks are not addressed, we run the very real risk of undermining the recovery and extending the financial crisis into a new phase”

    IMF Survey: Government Borrowing Is Rising Risk to World Financial System

    well, isn't that interesting?

    unfortunately, the "legacy of sovereign risks" is NOT being "addressed"

    you know what that means...
    The drill is to try and figure out where the next bubble is and have Goldman Sachs create a synthetic derivative for you.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Restating a central part of the economic debate, as to whether the U.S. is in an economic recovery (it is), I noted back on April 9:

    ...the IMF's forthcoming World Economic Outlook (to be released April 21) will add to the growing number of public and private reports showing a U.S. recovery. Furthermore, it could project 2010 real GDP growth of +2.5% to +3.0% for the U.S., with perhaps ~2.5% +/- 0.25% growth for 2011 (under the assumption that fiscal stimulus would be winding down, interest rates would remain low, and the financial system would continue its slow recovery).

    Needless to say, there could be some wildcards e.g., an external shock that could adversely impact the U.S. economy. But right now, there is mounting evidence that a cyclical recovery is underway even as some weaknesses and headwinds persist.


    It is April 21 and the IMF has just released its full World Economic Outlook.

    With respect to real GDP growth in the U.S., the IMF projected:

    2010: +3.1% (slightly better than my thinking)
    2011: +2.6%

    In its discussion, the IMF noted that the U.S. fiscal stimulus has contributed positively to U.S. economic growth. It explained:

    A stimulus-led recovery is under way in the United States, but private demand remains soft. Substantial monetary and fiscal easing, alongside other policies aimed directly at the financial and housing sectors, has provided a broad-based fillip to growth--the IMF staff estimates that the fiscal stimulus boosted real GDP growth by about 1 percentage point in 2009. In response to the stimulus and a robust inventory cycle, real GDP grew at a seasonally adjusted annualized rate of 2.2 percent in the third quarter of 2009 and by 5.6 percent in the fourth quarter. But private final demand is still subdued and remains well below precrisis levels. In the fourth quarter, consumption rose by only 1.6 percent as households continued to rebuild wealth; reduced inventory drawdowns contributed more than half of growth. During the same period, net exports also made a modest positive contribution to growth, as the rebound in global trade and recovery in partner economies boosted exports.

    IMO, it is the handoff between fiscal stimulus and private demand that could be somewhat trickly later this year and next year. It is that handoff that leads me to suspect that next year's growth could be slower than this year's. Indeed, the IMF adds, "The removal of policy stimulus will subtract from growth...in 2011." With respect to possible "wildcards," the IMF noted that "uncertainty around the outlook remains elevated but is lower than in the October 2009 WEO..."

    Key points from the IMF's report:

    1. The U.S. economy is recovering.
    2. Fiscal stimulus has contributed to the recovery (1 percentage point in 2009).
    3. Moderate growth is forecast for 2010 and 2011.
    4. The withdrawal of stimulus in 2011 will have a damping effect on growth, as private final demand remains sluggish.
    5. Uncertainty remains "elevated."

    Having said that, once the current recovery is sustained, the U.S. will need to pursue credible fiscal consolidation. The IMF has also discussed that need, but that is a topic that is beyond the scope of this thread.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by donsutherland1 View Post
    Restating a central part of the economic debate, as to whether the U.S. is in an economic recovery (it is), I noted back on April 9:

    ...the IMF's forthcoming World Economic Outlook (to be released April 21) will add to the growing number of public and private reports showing a U.S. recovery. Furthermore, it could project 2010 real GDP growth of +2.5% to +3.0% for the U.S., with perhaps ~2.5% +/- 0.25% growth for 2011 (under the assumption that fiscal stimulus would be winding down, interest rates would remain low, and the financial system would continue its slow recovery).

    Needless to say, there could be some wildcards e.g., an external shock that could adversely impact the U.S. economy. But right now, there is mounting evidence that a cyclical recovery is underway even as some weaknesses and headwinds persist.


    It is April 21 and the IMF has just released its full World Economic Outlook.

    With respect to real GDP growth in the U.S., the IMF projected:

    2010: +3.1% (slightly better than my thinking)
    2011: +2.6%

    In its discussion, the IMF noted that the U.S. fiscal stimulus has contributed positively to U.S. economic growth. It explained:

    A stimulus-led recovery is under way in the United States, but private demand remains soft. Substantial monetary and fiscal easing, alongside other policies aimed directly at the financial and housing sectors, has provided a broad-based fillip to growth--the IMF staff estimates that the fiscal stimulus boosted real GDP growth by about 1 percentage point in 2009. In response to the stimulus and a robust inventory cycle, real GDP grew at a seasonally adjusted annualized rate of 2.2 percent in the third quarter of 2009 and by 5.6 percent in the fourth quarter. But private final demand is still subdued and remains well below precrisis levels. In the fourth quarter, consumption rose by only 1.6 percent as households continued to rebuild wealth; reduced inventory drawdowns contributed more than half of growth. During the same period, net exports also made a modest positive contribution to growth, as the rebound in global trade and recovery in partner economies boosted exports.

    IMO, it is the handoff between fiscal stimulus and private demand that could be somewhat trickly later this year and next year. It is that handoff that leads me to suspect that next year's growth could be slower than this year's. Indeed, the IMF adds, "The removal of policy stimulus will subtract from growth...in 2011." With respect to possible "wildcards," the IMF noted that "uncertainty around the outlook remains elevated but is lower than in the October 2009 WEO..."

    Key points from the IMF's report:

    1. The U.S. economy is recovering.
    2. Fiscal stimulus has contributed to the recovery (1 percentage point in 2009).
    3. Moderate growth is forecast for 2010 and 2011.
    4. The withdrawal of stimulus in 2011 will have a damping effect on growth, as private final demand remains sluggish.
    5. Uncertainty remains "elevated."

    Having said that, once the current recovery is sustained, the U.S. will need to pursue credible fiscal consolidation. The IMF has also discussed that need, but that is a topic that is beyond the scope of this thread.
    Not sure where this report puts the monetary stimulus from the Fed in this equation. Surprised there could be any discussion about what happens to the economy going forward without talking about how the Fed exits the mortgage market and when they start to raise interest rates to a level which if held steady is sure to create a bubble somewhere in our economy.

    It would be interesting if you have more information as to what the IMF considered when talking about the fiscal stimulus. Were they talking about the approximately $200 billion from the stimulus package ot more broadly the $1.5 trillion deficit.

    It would also be good to know how much of the upturn is due to the turnaround on wall street. As this impacts the wealth effect you mentioned.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    [nomedia="http://www.youtube.com/watch?v=0OKSrMWCw1k&feature=player_embedded"]YouTube- Peter Schiff vs Obama's Stimulus - 3-25-2009 on MSNBC[/nomedia]
    "This Administration will constantly strive to promote an ownership society in America. We want more people owning their own home. It is in our national interest that more people own their own home. After all, if you own your own home, you have a vital stake in the future of our country."" GWB

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by washunut View Post
    Not sure where this report puts the monetary stimulus from the Fed in this equation. Surprised there could be any discussion about what happens to the economy going forward without talking about how the Fed exits the mortgage market and when they start to raise interest rates to a level which if held steady is sure to create a bubble somewhere in our economy.
    The IMF appeared to believe a gradual withdrawal of monetary stimulus is appropriate, but that the speed at which such stimulus can be withdrawn will vary from country to country.

    It would be interesting if you have more information as to what the IMF considered when talking about the fiscal stimulus. Were they talking about the approximately $200 billion from the stimulus package ot more broadly the $1.5 trillion deficit.
    The IMF was talking about the increased stimulus spending not the increase in the budget deficit. The IMF noted that approximately 20% of the deficit increase occurred from the fiscal stimulus. The rest was attributable to other factors, namely a decline in tax revenue on account of the severe recession.

    It would also be good to know how much of the upturn is due to the turnaround on wall street. As this impacts the wealth effect you mentioned.
    The IMF did not attempt to allocate what share of the recovery was due to non-stimulus factors. It only suggested that about 1 percentage point from 2009 was due to fiscal stimulus. My guess is that the figure was provided to counter political claims that suggest that the stimulus was "worthless." Those claims have little basis in economic literature when it comes to aggregate demand shocks and the IMF likely wanted to quantify the value of the stimulus package, especially as the IMF was out in front advising the advanced economies to undertake fiscal stimulus remedies well ahead of their actually having done so. Needless to say, a large part of the stimulus 2009 package was carried out to accommodate political desires (tax provisions, Medicaid increases, etc.) not economic ones.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by donsutherland1 View Post
    The IMF appeared to believe a gradual withdrawal of monetary stimulus is appropriate, but that the speed at which such stimulus can be withdrawn will vary from country to country.



    The IMF was talking about the increased stimulus spending not the increase in the budget deficit. The IMF noted that approximately 20% of the deficit increase occurred from the fiscal stimulus. The rest was attributable to other factors, namely a decline in tax revenue on account of the severe recession.



    The IMF did not attempt to allocate what share of the recovery was due to non-stimulus factors. It only suggested that about 1 percentage point from 2009 was due to fiscal stimulus. My guess is that the figure was provided to counter political claims that suggest that the stimulus was "worthless." Those claims have little basis in economic literature when it comes to aggregate demand shocks and the IMF likely wanted to quantify the value of the stimulus package, especially as the IMF was out in front advising the advanced economies to undertake fiscal stimulus remedies well ahead of their actually having done so. Needless to say, a large part of the stimulus 2009 package was carried out to accommodate political desires (tax provisions, Medicaid increases, etc.) not economic ones.
    Thanks, I agree it is silly to say that we got nothing from the stimulus. A different question ( and I think fairer) is was the benefit worth the cost.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by washunut View Post
    Thanks, I agree it is silly to say that we got nothing from the stimulus. A different question ( and I think fairer) is was the benefit worth the cost.
    A lot will depend on whether the stimulus is mopped up afterward. Failure to do so will erase the net benefit over time.

    Unfortunately, there has been a historic bias toward accommodation whereby policy makers provide stimulus and then fail to remove it afterward. One cannot rule out some programs becoming permanent (or regularly renewed).

    Finally, to put things into perspective with respect to the nation's fiscal imbalances, the IMF noted that the debt buildup associated with the stimulus was about 1.5% of GDP. The fiscal consolidation necessary to address the nation's long-term imbalances could be on the order of 8% of GDP.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by donsutherland1 View Post
    Unfortunately, there has been a historic bias toward accommodation whereby policy makers provide stimulus and then fail to remove it afterward. One cannot rule out some programs becoming permanent (or regularly renewed).
    Well, that's really not an issue, because the stimulus didn't really create new programs, it just pumped additional money into them. This budget authority was limited and will expire. It won't just keep going until someone cuts it off.

    But you do have a great point in general. Many government programs just keep going, because they develop a constituency. And many are just glorified stimulus and jobs programs. Defense contracts, farm assistance, etc. are two quick examples I can think of.

    And economically, the policymakers always seem to go with the stimulus side of Keynes, but never get around to raising taxes and cutting spending when times are good, keeping the economy on an even keel and paying off the debt incurred in bad times. The last time we were responsible enough to do that was 1993 with Clinton's tax increase, which led to surpluses.

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    Re: U.S. Economy Added 162,000 Jobs in March, Most in 3 Years

    Quote Originally Posted by misterman View Post
    Well, that's really not an issue, because the stimulus didn't really create new programs, it just pumped additional money into them. This budget authority was limited and will expire. It won't just keep going until someone cuts it off.
    In theory, yes. But that has not always been the norm. For one recent example, can one envision the likelihood of the 2001 and 2003 "temporary" tax cuts being permitted to expire when their are slated to do so under law. Such an outcome is highly unlikely. Although I believe that maintaining some of the tax relief makes sense, I also believe that the provisions that will be retained should be fully financed via offsetting fiscal measures.

    Henry Kaufman, a leading private-sector economist, among others have documented a bias toward accommodation whereby temporary programs have been renewed repeatedly or even made permanent in cases, while even modest measures that require fiscal discipline are put off e.g., the so-called "doctors fix" is an example of an effort to put off a modest measure of required fiscal discipline.

    I do not want to suggest that the recent fiscal stimulus will take the same path as earlier efforts toward accommodation. But one should be aware of past precedent.

    Clearly, certain provisions may need to be extended on their own merit e.g., unemployment compensation due to an unemployment rate that will likely remain persistently high on account of a larger than usual structural component. Others, including the tax provisions aimed at personal tax relief and spending aimed at boosting aggregate demand can't really be justified now that the economy has moved into recovery, albeit a moderate one.

    And economically, the policymakers always seem to go with the stimulus side of Keynes, but never get around to raising taxes and cutting spending when times are good, keeping the economy on an even keel and paying off the debt incurred in bad times.
    Absolutely. Politically, it is easier to "sell" accommodation than "sacrifice." Unfortunately, over time, what would ordinarily have been cyclical budget deficits are transformed into structural ones when the accommodation is made permanent de jure or de facto.

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