Saturday, December 5, 2009

Reason to be cautiously bullish on America

Boston Herald article "Reason to be cautiously bullish on America" (December 5th, 2009) may be correct in its main point, that the beginning of the end of this recession may be at hand, but appears to use contradictory economic indicators to show it.

You may have to squint to see them, but there are signs of recovery - jobless claims are down for a fifth straight week, productivity is up, market indices are up, the economy began growing again in the third quarter.

New jobless claims are lower, but hiring has not risen past jobless claims, with a loss of 11,000 total jobs in the same period according to current government figures.

When productivity rises, and the absolute value of labor has gone down, it is unclear whether or not productivity gains are due to innovation or simply the fact that production with decreasing marginal returns to scale is at a lower overall level. Indeed, the all the figures cited but the last could be an indicator that production has been being scaled back. It is difficult to tell if the last is a "real" phenomenon or a product of government spending.

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