Dude, Where's My Recession?

 

 

Rezoned development around a suburban transit hub. Image via New Jersey State League of Municipalities.

Happy beginning-of-the-month Freaky Friday, when the Bureau of Labor Statistics releases last month's job numbers and we sit down to play another round of Good News is Bad News:

I'm looking at this jolly message

Holy moly, we've got another one!

Payrolls grew a huuuuuge +253k in April, well above market expectations. There's no hint of any sort of labor market slowdown in these numbers. Other indicators had been hinting at a slowdown, but these are more reliable.

— Justin Wolfers (@JustinWolfers) May 5, 2023

and instead of smiling, I'm instantly telling myself ruh-roh, Fed's gonna keep pushing those interest rates up. Bad News! But wondering, can't you let it be Good News for a change, just the one time?

As young Wolfers actually appeared to be doing, in fact, in this series:

Lemme tell you why I love a hot labor market... It helps all of us find work, and it *particularly* helps traditionally disadvantaged groups.

Here's the Black unemployment rate, which just set a new record low of 4.7%. That's 0.3%-pts lower than *ever* recorded before. pic.twitter.com/mIIfXjb7DG

— Justin Wolfers (@JustinWolfers) May 5, 2023

And perhaps not without reason, because wage growth seems to be finally really ahead of inflation, with the Consumer Price Index down to around 4% (where Krugman was saying sometime last year it ought to be allowed to settle, instead of insisting on getting it down to the 2% target), and the workers at the lower end of the scale are really getting something out of this, while those at the upper end must be OK because they won't stop spending money, on restaurants and road trips and plane trips and 7% mortgages, which is what is driving all this peculiar prosperity.

Somebody, I don't remember who, offered a bit of an explanation: the higher interest rates aren't so much an end to inflation as a displacement of it: like inflation, they make things more expensive, but only the things you need credit to buy. Thus, the Fed's actions aren't changing the overall costs of growth, just shifting who has to pay for it, to the upper middle class if you like, which is doing well enough that they've decided they can afford it.

And that's the story: as some of us were saying a year ago, it's going to be OK. Looks like we won't be solving the affordable housing crisis any time soon, but that's not the Fed's fault—it's conservatives and too many NIMBY liberals who don't want to solve it (ironically, New York's progressive supermajority seems to have prevented not-so-progressive Governor Hochul from accomplishing the one truly progressive thing she wanted to do, a plan for financing 800,000 new homes across the state, because the suburbs were afraid of distasteful developments around the transit hubs).

And in general, the biggest threat to the recovering economy isn't the Fed but the Republican Party, and its attitude toward the debt ceiling, which is finally starting to get really frightening, because, as Greg Sargent and Paul Waldman said at the Washington Post, they think destroying the US economy for some unspecified period of years will help their election prospects:

a sizable swath of Republicans see default — or deep spending cuts, which would also damage the economy — as probably the best or only shot at ousting Biden. Yet if that’s the case, then why would anyone count on the right kind of pressure making Republicans cave?

After all, for some GOP members, particularly the radicals demanding confrontation, the theory seems to be that the Biden presidency is an emergency, so if damaging the economy would weaken his chances at reelection, it’s the “right” thing to do.

I think they're wrong about that, as usual (bringing the US to the brink of default in 2011 and achieving a downgrading of the nation's credit rating didn't win them any votes in 2012), but that's the thing. I appreciate Democrats' efforts to raise the debt ceiling through a discharge position (the rarely used procedure for introducing a bill past the objections of the Speaker and forcing a vote in which there could be enough of a handful of halfway sensible Republicans to pass it—no guarantees, but it could happen), but I really like the suggestion of John Stoehr's Editorial Board as to how Biden should act unilaterally, on the basis of the 14th Amendment's injunction against putting the validity of the public debt in question:

One thing everyone agrees on is failure to lift the debt ceiling is badbad for everyone for no good reasonreason. So Joe Biden should avoid waiting for permission from the House Republicans. He should pay the country’s debts, then say sorry for stopping a mass global panic.

Because he wouldn't need to apologize—

The irony is the House Republicans probably won’t ask for an apology. They’d have to admit to being responsible for forcing the issue. Imagine hearings in which Jim Jordan demands to know why Biden privileged billions of normal people over his dearly beloved Constitution.

—and if he did  ("Please excuse me for saving the country from financial disaster without any regard for Marjorie Taylor Greene's feelings") it would be worth it.

Cross-posted at The Rectification of Names.