More Jobs, Low Inflation
By Isaac Cohen*
The US central bank, known as the Federal Reserve, by law has a dual mandate of fostering maximum employment with price stability. The latest figures reveal positive indications in both objectives. There is substantial improvement in the labor market, with monthly creation of more than 200,000 jobs throughout the year and the unemployment rate declining to less than 6 percent. Meanwhile inflation has remained, for more than two years, below the 2 percent objective preferred by the central bank. Furthermore, the latest figures revealed strong economic growth in the last six months, revised at 4.6 percent for the second quarter and preliminary at 3.5 percent between July and September.
However, salaries lag behind, with hourly wages growing only 2 percent annually for the last five years. Also, slow private business investment has contributed less than 1 percent to economic growth in the last three years.
A new positive element in the short term economic outlook comes from a decrease in energy prices. The price of oil is down 25 percent since July, which is reflected in gasoline prices falling to around $3 per gallon. This is equivalent to a tax rebate which consumers can spend in other items. An estimate is that every dollar decrease in the price of energy means $100 billion increase in the consumption of other products.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.