We believe that builders will have to build more, and they will build more.Apparently builders are ready to "fall in line". Perhaps Mr. Yun is simply fulfilling a Chuck Norris style role for a major component of the supply side. Git er' done! In the same irrational vein, governments and private interests are still trying to hammer square pegs into round holes by finding ways to put lower income levels into non innovated housing structures. This of course is part of the strategy which backfired on all concerned, prior to the Great Recession. One can imagine the rationale underlying such nonsense...if lower income levels get housing innovation, what if upper income levels want it too?! Where would we ever get our bonuses and local government tax base?
Something about this seems to fit in with the idea of raising the interest rate so that the economy will "fall in line" and return to "business as usual". This "build it and they will come" Neo-Fisherian strategy is based on not just the inverse of reality, but a lot of wishful thinking - and it would not be so bad if central banks weren't preparing to set the wheels in motion for the Great Return to Normal. As Nick Rowe indicated, this is the kind of reasoning that leads to monetary black holes.
Who doesn't want to see interest rates return to a better normal? Sure, everyone wants to see a stronger economy, and many statistics have indeed increased market confidence in this regard. However, the too little noticed indicator of NGDP continues to show where too many measures of prosperity were allowed to fall away. Small wonder the Fed would just as soon pretend that a nominal level target doesn't matter, because they have yet to openly apologize for the damage of the Great Recession. While it is understandable why they didn't, the reluctance to be honest with the public only puts the Fed in a more fragile position among other policy makers in Washington. If the public doesn't support them in crucial moments - who will?
As a result - ready or not - the economy will get better because it "has to". Hmm, can anything possibly go wrong with that logic? Full speed ahead, never mind the hole in the hull which wasn't repaired after hitting that iceberg, even though the water was pumped out this time. In "214,000 New Jobs Isn't What It Used to Be", Josh Mitchell reflects on October's gain and notes:
But there's a big caveat. The U.S. population is a lot bigger today than it was then.What's more, I would add that many job gains are in prosperous regions. Some cities are not as well represented for job gains, and many rural regions remain in the lurch, as to economic formations that could regenerate hope for the future. Pretending that no structural reforms are necessary, and that the same old strategies can still be deployed by both private interests and the Fed, is a loser's game. It's time to take a more realistic look, at how real growth for the future might actually occur.
Since this post mostly serves to make a simple point (private interests and central bankers need to work in tandem to improve economic access instead of declaring an arbitrary normal), I'll let Josh Bivens of the WSJ have the last word:
There is a large outstanding stock of workers who lost jobs during the Great Recession, plus all the new labor-market entrants who have appeared each month over the past seven years...that must be worked off before slack in the labor market is reduced and workers start seeing better wage growth. The labor market's stepped up pace of job growth (or faster flow) over the past year needs to continue for some time before all potential workers are reabsorbed into the market, taking up the remaining slack and pushing up wage growth again. And the Federal Reserve should wait for this accelerating wage growth to appear before raising interest rates.
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