An Equilibrium Moment

Oops, wrong book.

By all accounts we are beginning the jobful part of the jobless recovery.  Sufficient demand has accumulated and enough people's personal balance sheets have caught up with healthy corporate balance sheets to suggest that we are in for an accelerating increase in jobs.  Almost all recent monthly reports have been revised upwards with more perspective.

As someone out there on the Internets wrote: "Economists tend to underestimate job losses during the downturn and underestimate job gains during the recovery."  Anyway, my guess is unemployment will keep falling, though the complete flat-lining of construction makes me worry about the high school diploma/ten years of skilled construction work group.

But what really worries me are two things:

First, the GOP and the "50 Little Hoover" (aka America's Governors) are trying to squelch the recovery by shutting off government spending.  The fact that these cuts are unpopular and could hurt the GOP in 2012 will not matter if unemployment doesn't get below 8% by election day.  Not to mention it will suck for the people who are going to lose benefits.

Michael Moore - who we can reliably report is indeed fat - said something smart in Wisconsin today: "America is not broke.  We have a ton of money.  It's just all in a few people's hands at the top of the economic pyramid."  (Or something, I'm paraphrasing.)  Obama has not - to this point - impressed me with his ability to make clear distinctions between his positions and the Republicans.  When it comes to taxing the rich, he's going to have to do that.

Or else we're going to see a continued degradation of public services, combined with a further concentration of wealth at the top.

The second thing that worries me is oil prices.  When oil prices hit $4 a gallon in 2008, I was certain that it was Wall Street speculators trying to create another bubble in order to cover their losses on real estate.  I was derided by my friends who teach economics, but it looks like at least part of the increase was indeed caused by price manipulation.

Today, the "exterior" increase in oil prices - that is to say the "tax" we pay on a gallon of gas for reasons beyond supply and demand - is unrest in the Middle East.  Energy speculators are bedwetters, and they tend to spoke easily.  If Libya doesn't resolve itself and the House of Saud trembles... Here comes $5 a gallon.

Needless to say, that will put a crimp in the recovery by driving up prices across the board and spooking the Fed into raising interest rates to combat an inflation that is caused less by monetary issues and more by spooked oil buyers.

So we're at a tipping point.  The economy has reached the stage of recovery that can largely be self-sustaining, unless we get more shocks.  Slashing public spending, overheated oil prices... I guess we can add the PIIGS in there, too.

Optimism or pessimism?  Take your pick.