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US economy less bad than it seems?

Posted by Eliot Weinstein on January 10, 2008

Weekly claims for unemployment benefits have fallen dramatically. Some analysts believe that this does not provide useful information, as the holiday season distorts the number of unemployment applicants. However, the jobless claim figures have historically tracked overall unemployment very well, despite the seasonal sampling problems. Developments in employment/unemployment numbers are being followed closely, as total US unemployment rose to the (historically low but recently high) rate of 5% after last month.

Also, Federal Reserve Chairman Ben Bernanke announced earlier today that he is ready to further reduce the target interest rate to support the economy as it works through the recent disruptions in the housing and credit markets.

By the way, I think the answer to the title questions is “yes”. In my mind, there is a better than 50% chance that the United States will not experience a recession in 2008, and will at worst experience a mild recession some time over the next 3 years. I won’t go so far as to predict “no recession”, especially because I’m not sure how the economy will actually respond to the Fed’s new stimulus. (Recall that Tyler Cowen once wrote, “All propositions about real interest rates are wrong”.)

One Response to “US economy less bad than it seems?”

  1. Caelyn said

    What a joy to find semoone else who thinks this way.

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