I’M ON quasi-vacation this week, but I’d like to make two quick observations about the American economic situation. Yesterday, the Federal Open Market Committee concluded its June meeting and released new economic projections. I found them profoundly disappointing. American unemployment is expected to remain uncomfortably high through 2013 at least (in which year the Fed projects an unemployment rate between 7.0% and 7.5%, up from April’s estimate). Keep in mind that 2013 is 7 years from the official start of the recession. One simply can’t look at projections of serious labour market difficulties over that stretch of time and see anything other than a major crisis, for workers, wages, and budgets.There’s no real mystery behind the slow improvement in employment; it flows directly from the lacklustre growth in the economy. The Fed projects that the economy will expand at less than 3% for 2011 as a whole; growth was revised downward for 2011, 2012 and 2013. It should be noted once again that rapid labour market recoveries are associated with periods of rapid, above-trend growth. If you don’t have the latter, you don’t get the former.Now, the Fed’s projected growth rates are for real GDP expansion. And it’s possible that slow real output growth is entirely due to real factors. It could be the case that if the Fed attempted to push the economy to go any faster, …
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