March 4, 2011

What other indicators matter in a slow-growth economy besides jobs?

The unemployment rate dipped slightly in February, but although the rate went down, the increasing number of people without jobs indicates we’re still not seeing employment growth, said economist Bruce Yandle.

“Employment growth is critical to a recovering economy in the short-run, and it takes about 3.5 percent GDP growth, which we don’t have right now,” said Yandle. “That’s the economic growth we need to soak up new entrants into the job market, and take care of those currently without jobs.”

“There are a lot of indicators to consider when looking at the strength of the economy,” said Yandle. “If we were to build an index that mattered to consumers, it would include jobs, incomes, the value of stock portfolios, the largest asset of consumers—the value of homes, and prices.”

The Federal Reserve says we only need to worry about core inflation, says Yandle, but people notice when prices go through the ceiling for things they care about, like food and gas.

“The latest GDP numbers included inflation index that showed the national economy inflating at 2.1 percent,” said Yandle. “Now that’s not a danger zone, but that is two times the size of 2010 levels.”