Headlines, "Federal Reserve Faces Puzzle" strong job market doesn't match signals, suggest economic slowdown

Question

The federal reserve say, "they are in a conundrum." What would you tell the federal reserve, if you could, the reason for the slowdown in a strong job market.

From: Scott Lanman of Bloomberg News Jan 31 2007

Answer 1

Simple, there's no puzzle here, just a gullible journalist.

Unfortunately for Lanman he wrote that article yesterday, on Jan 30th. Today, Jan 31st, the commerce department reported GDP growth last quarter was far higher than expectations, at 3.5%. That's fairly booming. So for the past 3 1/2 months at least, the economy has indeed been growing quickly right under the noses of these pundits who've been obsessing about slow growth -- hence the tight labor market. No conundrum there at all.

The minor Economic statistics are often like an inkblot. If you want to believe the economy is slowing, there are always a handful of stats to suggest that. If you want to think it growing, at the same time there are stats to suggest THAT. GDP gives the best picture, but even that's a picture of what was happening a couple months ago, and is based largely on estimates that might change, leading to a revision (there are no absolute truths here, only best estimates of reality).