Before I get started, here’s a couple of items as follow-up from last week. First, we have some scientists who found that consuming lots of sugar makes you want more food. And here we have some other scientists who almost started to laugh when they heard details of how Jose Padilla allegedly wanted to make his “dirty bomb.”
Meanwhile, back at the Federal Reserve….
Alan Greenspan has once more telegraphed his intention to begin raising interest rates. The only thing missing is a big sign with flashing lights. This colossal turn signal theoretically prevents the financial markets from panicking. Make no mistake, the rate hike is necessary: not only can we realistically stay at four decade lows for a limited period of time, but there is definite evidence that inflation is with us once more. Of course that couldn’t possibly have anything to do with the abnormally low exchange rate and the price of oil, but the FOMC can’t do much about those; their mandate says they should control inflation, and the tool for that job is interest rates.
Not everybody agrees, however, that there even is inflation. Or that raising interest rates would fix it without negative impact to other areas of the economy. After all, raising interest rates will mean it is harder to pay off debts. This is true of everything from your credit card and adjustable rate mortgage (call your mortgage company and lock in that rate now!) up to and including the National Debt.
As if that weren’t problematic enough, we are told by pundits that raising interest rates might cause fewer jobs to be created, and you don’t want that, do you? This arguement loses some steam when the government’s own figures show almost a million jobs created in the last 3 months, and 9 straight months of job growth. Of course there is some question about the accuracy of those numbers, and the impact of those jobs (some of them are not what you would call a “career”).
Math time! Something between 1.9 million and 3.4 million jobs were lost in the Bush Administration. In the interest of fairness, let’s do a simple average and call it 2.65 million. Here are the jobs “created” by month: May, 248,000; April, 288,000; March, 337,000; February, 21,000; January, 97,000; December, 8000; November, 43,000; October, 126,000; September, 57,000. That adds up to 1,225,000 new jobs in the last 9 months (by the way, according to these figures, only 873,000 jobs were added in the last 3 months, far less than a million. Maybe the nice people at the P-I were adding to the beginning of the year, which gets you 991,000). That still leaves 1,425,000 people who had full time jobs at the beginning of the Bush Administration that do not have them now.
But wait! There’s more! Economists believe we need to add 150,000 to 200,000 jobs to the economy each month just to keep up with people entering the labor force. That means we needed at least 1,350,000-1,800,000 jobs in the last 9 months — and we fell short. Over the 40 months (so far) of the Bush Administration we needed 6-8 million jobs added; instead we have a net loss of 1.5 million jobs. It is ironic that attempts to make the figures seem as if the job market is finally recovering are giving Greenspan exactly the cover he needs to raise interest rates.
The job market stinks, plain and simple. Nevertheless, inflation is here, and therefore interest rates are going up. At least there was somebody who knew how to deal with similar problems. Right?