Is This Miracle Economy a Reality, Or Is A Bubble Forming?

The question facing the United States’ economy is relatively simple — is this current run in economic growth real, or will it come crashing down? The answer, of course, is far more complex than it might appear.  This month’s unemployment statistics have sent economists into a flurry of joy. Unemployment rates sank to historic lows, with correspondingly low levels of inflation. The report shows that the economy added more than 260,000 new jobs. This concludes a record-setting stretch of 103 months of job growth. These numbers are in complete defiance of all predictions. Many had felt that the economy was in a slow decline into a recession. However, the report has indicated that the US economy appears to be strong. According to Loyola Marymount University economist Sung Won Sohn, “‘Spectacular’ is the only way to describe this jobs report. It is hard to believe that this 10-year-old recovery keeps pumping out home runs.”

White House Thrilled About Economy, Stable Inflation

With decreasing unemployment, some had posited that inflation would increase rapidly. Instead, however, the current consumer inflation rates appear to have remained stable. What occurred during the 1970s after the post-war economic expansion seems to have been curtailed, for now. The President was quick to laud the economic news, suggesting that the future would be even brighter. Others have followed suit. For example, Doug Holtz-Eakin, an economist who helped John McCain during his presidential run, was encouraging — but cautious. “You have to give the White House some credit on the productivity front,” he said. “There’s been a clear change there. It’s very encouraging, but you can’t celebrate too soon.”

Economic Stability

With the positive report come questions of sustainability. While the Federal Reserve contemplates its next move, this news may change the way the economy is viewed. If the growth continues, it may be necessary for the Fed to tighten rates, again. The overall confusion lends credence to the opinion that the Fed is tinkering with the US economy. While success is good, it is not guaranteed. Any single incident could derail growth. Christina Romer, an economics professor at the University of California at Berkeley, said, “Expansions don’t simply die of old age,” continuing, “Something has to knock us away from full employment. Right now the U.S. economy appears to be relatively stable.” The general consensus, however, would hold that, eventually, the growth must stop. Whether near or long term, the change will highlight the Fed policy decisions and the need for greater levels of decentralization in economic control. Think the economy is too good to be true? Is a recession is coming? Will the current bull run continue into the foreseeable future? Let us know in the comments below!