For many years comedian Jimmy Durante signed off from his radio and television shows with the statement “Goodnight Mrs. Calabash … wherever you are.” I am sometimes reminded of that Jimmy Durante quote at the end of something. And there are a few “somethings” that have brought that goodbye-statement to mind.
As time progresses the meetings of Federal Reserve’s policymaking group, the Federal Open Market Committee (FOMC), remind me of Shakespeare. You know that scene from Macbeth where the three witches gather and utter those immortal lines “double, double toil and trouble/fire burn and cauldron bubble.” Now that’s how to go about casting a great spell.
Conventional wisdom suggests that after first being elected, a president’s first term policies are established to help fulfill campaign promises and set the stage for re-election. In a second term that same conventional wisdom suggests — freed from future re-election pressures — a president focuses on establishing a legacy.
Uncertainty is one of those things that represents every businessperson’s worst nightmare. Uncertainty about the intentions of their customer base, uncertainty about policy actions that government may or may not take, and uncertainty about the direction of the world’s economy given the highly interrelatedness of economies around the globe. All-in-all, right now is just about the worst possible planning environment businesses could possibly imagine as one year ends and the next is about to unfold. With this omnipresent uncertainty, it is little wonder that the state of economic affairs seems so unsettled, as represented by a number of reports last week.
Back in the years between 2008 and 2010 Americans were constantly bombarded by the “S” word, that word being “stimulus.” According to the macroeconomic theory espoused by John Maynard Keyes, during a recession policymakers can stimulate aggregate demand by increasing government expenditures and/or cutting taxes. One or both components of this fiscal policy fix for our nation’s economic ills were followed by George W. Bush and Barack Obama, with both presidents suggesting that millions of jobs would follow, along with the economic prosperity that everyone desperately wanted.
To trust them or not to trust them; that is the question our nation seems to constantly ask about market mechanisms that are supposed to guide resources via Adam Smith’s “invisible hand.” Some (myself included) find that allocative decisions provided by markets are generally far superior to those imposed by government and/or special interest groups. And these special interest groups may be either business or union related. Two recent examples illustrate clearly why Americans should place their faith in the impersonal forces of the marketplace.
Labor market conditions in the U.S. have been extremely trying for job seekers for the past several years. The “official” unemployment rate of 7.9 percent in October is far above the level thought of as representing “full employment,” which is generally set around 6 percent. And while employment levels are definitely increasing, job creation is not at a particularly rapid pace.
Last Friday the latest employment/unemployment report came out and the news was pretty good. The number of payroll jobs increased by 171,000 for October and figures for the two prior months were revised upward. And while the unemployment rate ticked up to 7.9 percent from 7.8 percent in September, it can be largely attributed to workers re-entering the work force.