Newspaper article THE JOURNAL RECORD

Evidence of a New Era

Newspaper article THE JOURNAL RECORD

Evidence of a New Era

Article excerpt

NEW YORK -- Once upon a time in a more well-ordered economy, we sought to measure everything by the numbers, the better to get a quick read on what otherwise could be very confusing.

We were certain that inflation would follow if the jobless rate fell below 5 percent. And that when the Federal Reserve raised interest rates a quarter point it would slow the economic works.

But, hey, it doesn't seem to work that way anymore. The jobless rate is down to 4.2 percent but inflation isn't in sight. And the Fed has been raising rates without observable results.

But that's only the beginning. The world is changing, not in the incremental manner of the old days but in such rapid order it has left many of the reliable old numbers back there in the past.

Nothing underscores the change more emphatically than the U.S. government's own recognition this week that some of the old numbers just don't add up in describing economic growth and productivity.

The implications are huge, including a possible new perspective on the household savings rate, whose negative balance has been a major source of worry in a generally ebullient economy.

For the first time in decades, that rate has fallen below zero, measured traditionally, meaning households have been spending more than their incomes -- in short, borrowing to maintain lifestyles.

The pattern, developing at a time of relative well-being, has been viewed as dry rot in the base of prosperity and a weakness that could greatly compound damage in any future economic downturn.

Under the new measurements, in which government pensions will be counted in household savings -- as they are now for private-sector pensions -- the overall rate will move higher, changing not just economic perspectives but hypotheses built upon them. …

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