by Heather Long | @byHeatherLong | March 29, 2017: 2:42 PM ET
John C Williams, President, Federal Reserve Bank of San Francisco
Congratulations, America. The economy is finally back to normal.That’s what John Williams, the head of the Federal Reserve Bank of San Francisco, declared Wednesday.
“The data have spoken, and the message is clear: We’ve largely attained the hard-sought recovery we’ve been after for the past nine years,” Williams told the Forecasters Club, a gathering of economists, in New York. He dubbed it a “Goldilocks economy.”
Unemployment peaked at 10% after the Great Recession. Today it’s just 4.7%, a level Williams said constitutes “full employment” because there will always be some job seekers, even in a healthy economy. Inflation is also “nearing” the Fed’s goal of 2%, he said.
The Fed raised interest rates this month for only the third time since the financial crisis. The central bank is expected to raise rates two more times this year, but Williams hinted again that three more hikes might be appropriate in 2017.
He said Wednesday that the Fed is as close “as we’ve ever been” to achieving its goals of full employment and stable inflation.
There’s a little more at the link, and at least Dr Williams noted that our economic growth is too low. The New York Post is given to sensational headlines, but this one seems appropriate:
By Post Staff Report | March 30, 2017
With Thursday’s final revision of fourth-quarter GDP growth to 2.1 percent from its previous 1.9 percent level, President Obama is the only president since Herbert Hoover to not have guided the US economy to 3 percent growth in any year he was in office.
The US economy grew 1.6 percent in 2016 from the previous years, according to the Commerce Department, which tracks GDP.
Obama’s best year, as far as growing the economy, was 2015 when it grew 2.6 percent from 2014 — after growing 2.4 percent that year from 2013.
The recovering economy — and steady job growth — gave Obama lots of momentum, but the economy sputtered again last year, Commerce reported Thursday.
The Commerce Department news release can be found here.
The slight upward revision of the fourth quarter GDP growth from 1.9 to 2.1% did not change the overall 2016 GDP growth rate of 1.6%.
We have noted, many times, Heather Long’s CNNMoney article stating that the public perception of the unemployment rate was far more consistent with U-6 rather than the ‘official’ U-3 rate.
Paul Krugman, a Nobel laureate in economics, regular columnist for The New York Times and $225,000 per year professor at City University of New York, wrote:
For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis, longer-term economic growth is looking very disappointing. Some of this is just demography, as baby boomers retire and growth in the working-age population slows down. But there has also been a somewhat mysterious decline in labor force participation among prime-age adults and a sharp drop in productivity growth.
Really? A Nobel Prize-winning economist, and all he can say about the persistent decline in the participation rate is that it’s “somewhat mysterious”? Unlike the esteemed Dr Krugman, I don’t have a PhD in economics, nor am I a “distinguished scholar” at CUNY Graduate Center’s Luxembourg Income Study Center, but the persistent decline in the participation rate isn’t “somewhat mysterious” to me; I just told you what has caused it!
More, the “regular people” mentioned in the CNNMoney article have told us what the problem is: they recognize what the real unemployment rate is, and understand the futility some people feel in looking for jobs that simply are not there. The CNNMoney article said, “The general public has ‘extremely little factual knowledge’ about the job market and labor force, Rutgers found,” but, looking at how the “general public” estimated that the real unemployment rate is “9%, or higher,” and got it right, I’d say that the “general public” actually have more factual knowledge about the job market and the labor force, and the economy, than do the highly educated talking heads.
Dr Krugman is paid $225,000 a year by CUNY, to teach one seminar a year. Robert Stacey Stacy McCain guessed that Dr Krugman’s salary from The New York Times ought to be at least the equal of Tom Friedman’s reported $300,000 a year. I suppose that, to him, it’s easy to advocate policies which would drive up energy costs, because he is wealthy enough to afford them, having conveniently forgotten that there are other people who cannot. It’s easy for him to say that “the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis,” because he only hobnobs with people who do have jobs, good jobs: Times colleagues, university professors, government officials and, occasionally, graduate students in economics. It’s easy for him to say, look, unemployment is down to 4.9%, because the people with whom he associates are not worried about their careers, are not worried about losing their jobs, and are not worried about whether they’ll have enough money to make it until next payday. Thing is, it was the people who do have to worry about paying their electric bill, who are worried about making last Friday’s paycheck stretch until next Friday’s paycheck, who got it right about the economy.
And this we have Dr Williams, “an alternate voting member of the Federal Open Market Committee,” and thus someone who just might have a vote in the Fed raising interest rates, saying that the Fed ought to consider four interest rate increases this year, not just the three they have indicated will happen:
San Francisco Fed President John Williams said his central bank colleagues should not “rule out more than three increases total for this year.” The Fed already approved one hike earlier this month, with forecasts anticipating two more before the year ends.
Williams’ remarks were somewhat less hawkish than those from Boston’s Eric Rosengren earlier in the day, but they carried the same basic theme: the recovery is in full bloom, and the Fed needs to keep a handle on growth.
“What a difference four years makes. We’re now very close to reaching the Fed’s dual mandate goals of maximum employment and price stability,” Williams said, according to prepared remarks he was delivering to the Forecasters Club in New York. “In fact, if you do the math, we are about as close to these goals as we’ve ever been.”
I’ll remind you again: the Fed projected 1.9% total GDP growth for 2016 at their meeting in December of 2016; after 11½ months of the year had already elapsed, they still got the GDP growth projections significantly wrong, and they are the ones who attempt to tinker with the economy by ‘controlling’ interest rates. These people all have advanced degrees, and have served in important and prestigious positions in both government and private industry, but they are wholly divorced from the real shape that the economy is in across the country.
Housing on Girard Avenue, near the Philadelphia Zoo. These are some of the better row houses in the area; some are dilapidated beyond human habitation. Photo by Editor; click to enlarge.
Patrick T. Harker, for example, is the President of the Federal Reserve Bank of Philadelphia, and though Philadelphia has many depressed areas, and his hometown of Camden, New Jersey is even worse, Dr Harker has spent his entire adult life insulated from poverty, earning all of his degrees from the University of Pennsylvania, an Ivy League school, and then holding academic positions at the Wharton School and the University of Delaware, a White House Fellowship, yada yada yada, throughout his career. Did Dr Harker ever pay any attention to the dilapidated housing along Girard Avenue, adjacent to the Philadelphia Zoo?
The economic decisions being taken in government for our country are being taken not by ordinary Americans, but highly successful people, the vast majority of whom have been completely insulated from poverty. They are taking decisions based on their own perceptions, perceptions from a life of wood-paneled executive offices and high-brow cocktail parties and servants to clean up behind them. It’s easy, for example, to support the global warming climate change regulations which would increase your electricity and fuel prices, and the prices for everything you buy, when you have been making six-and-seven figure incomes for much of your life; it’s not quite as easy when you are a working-class American living from paycheck-to-paycheck.
Donald Trump remembered those people, even if he was really never one of them, while the Democrats, despite their vociferous claims that they are the party of the working man, forgot them entirely, proposing policy after policy which would increase the burdens on working-class Americans. That’s why Hillary Clinton is talking to groups and saying that “There’s no place I’d rather be . . . other than the White House.” When Dr Williams tells a group of economists that “largely attained the hard-sought recovery we’ve been after for the past nine years,” he’s seeing only the economy of his circle of friends, he’s seeing only the economy of the successful people with whom he associates.
The professionals have completely missed the truth about the economy, because their views are wholly ego-centric. I’d rather see someone like Donna Coomer or Amber Hays taking those economic decisions, people who really understand the economy, because they are fighting it, every day.
“Come to our world,” Patricia Cole of Beattyville said. She was talking about President Trump, who has had everything handed to him, lives a gold-plated life, but it really ought to apply to the Federal Open Market Committee, ought to apply to Paul Krugman and Lawrence Summers, to all of Washington, DC, really.