What is the Current Macroeconomic Situation in the US?
In June 2012, Federal Reserve Bank of St. Louis President James Bullard states, “the current stance of monetary policy is ultra-easy, and remains appropriately calibrated given the macroeconomic situation in the U.S” (St. Louis Fed’s Bullard, 2012, par. 1). The statement, however, is ambiguous and subsequent information provided by Bullard contained no real clarifications. For example, Bullard explained that the “policy rate remains near zero” and a “large Fed balance sheet remains in place” (par. 4). In response to comments that the Fed’s actions have only produced “very low nominal and real interest rates across the yield curve” (par.6), Bullard explains that his calculations estimate that “yields would normally be considerably higher given current macroeconomic conditions” but that the low areas are due, in part, to the “continued turmoil in Europe [that] has caused U.S. interest rates to fall due to a ‘flight-to-safety’ effect” (par. 6). Perhaps, Bullard is correct, but this does little to fully explain the current macroeconomic situation in terms of unemployment, inflation, and GDP growth, expansionary fiscal policy tools, FOMC, and easy money policy tools. Instead, Bullard’s response appears to be more of a blanketed cover.
According to the Euler Hermes Group, as of May 2012, the US economy yielded over 100,000 jobs over seven months but the figure fell short of the 200,000 needed to “rapidly bring down the unemployment rate, which remained at 8.2% at the end of March 2012” (Economic Outlook, 2012, par. 1). On November 2, 2012, the Bureau of Labor Statistics (BLS) reported the unemployment rate of 7.9% and the 12.3 million unemployed persons were basically unchanged in October, following declines in September. In October 2012, the civilian labor force increased by 578,000 to 155.6 million, labor force participation increased up to 63.8%, total employment rose by 410,000, and the...
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