One of the items that many of the forecasters warning of a double dip held up as evidence was the drop in Philadelphia Fed’s manufacturing index in September. It showed a reading of -17.5, which is definitely pretty bad. While the index, like most indexes, does generally move in step with the overall economy, the Philadelphia Fed’s coverage is a relatively narrow slice of the country (most eastern Pennsylvania and New Jersey). Since this reading was out of line with most other data, it seemed more likely that the Philadelphia Fed number was an anomaly rather than it was picking up information not seen elsewhere.
The October Philadelphia Fed index was released yesterday. The reading was a moderately healthy 8.7. It doesn’t seem that this one received as much attention as the negative reading from last month. It would have been interesting to interview the double-dip forecasters to ask whether they had revised their assessment.
The other important data released yesterday was the weekly unemployment claims number, which again came in just over 400,000. This does not suggest strong growth, but it does suggest some amount of job creation, rather than the job loss we would see in a recession.
None of this should be seen as celebratory. The economy looks to be growing in a range of 2-3 per cent. This is roughly fast enough to keep even with the growth of the labour force. That implies that we are making zero progress in putting people back to work.
Unfortunately, because many economists misread the economy and raised the specter of a double-dip, this slow growth is likely to be seen as good. It isn’t and the double-dippers have done the country a serious disservice by creating a set of incredibly low expectations against which economic performance is now being measured. And the media deserve much of the blame for being suckered.
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