The jobs report today was consistent with a mass of other data that suggest that the economy right now is stronger than it has been at any other point since President Obama took office. The unemployment rate dropped sharply, from 7.3 percent to 7 percent, and we saw the second month in a row of job creation at or above 200,000. My favorite part of the report was the government-jobs number. Public jobs dropped by 9,000 jobs in November, a continuing sign of idiotic, irresponsible, terroristic Republican austerity. It kind of makes the Keynesians who have been fretting about secular stagnation look foolish, which couldn’t happen to a nicer, humbler or more collegial bunch.
One of my favorite indicators of the near-term trend for the economy is auto sales, since folks tend to buy a car when they are feeling optimistic about their financial circumstances. Cars are better than other durable-good purchases (such as washing-machine sales) since they are less related to the nuances of the housing market. Auto sales jumped above the 16 million number that serves as a kind of 98.6 for the economy in November, all the way up to 16.4 million. In addition, consumer confidence in the University of Michigan’s well-respected survey jumped sharply.
Consumer optimism like that is consistent with a job market that creates 250,000 jobs a month, which will likely be the rate posted for December.
If data continue to be this good, we will begin to see whether the Fed can stay ahead of the curve. Reserves have increased at an astonishing rate, but the reserves have not induced a lending surge, and hence, an increase in the money supply and inflation. The Fed has gambled that it can get the reserves out before inflation takes off when the economy finally recovers, a move for which there is no precedent. We might soon find out whether it is possible.