The business press is trying to convince readers, listeners, and viewers that Janet Yellen's Federal Reserve kept interest rates at zero not because of U.S. economic conditions, which supposedly "look good" with "steady economic growth." No-no. She stayed the course because of the troubled global economy.
Thursday evening, Reuters wrote that the Fed failed to move "in a bow to worries about the global economy, financial market volatility and sluggish inflation at home." Bloomberg directly blamed "China growth concerns." The Associated Press's Martin Crutsinger cited "a weak global economy, persistently low inflation and unstable financial markets." None of the three noted the deteriorating situation in the U.S., and the only item I could find which cited the Fed's full set of pathetic annual U.S. growth projections was a Wall Street Journal editorial.
Despite a torrent of weak economic data in the past two weeks (more on that in a later post), two of the three wires are still pretending all is essentially well. At least the Reuters report noted the Fed's desire to see "some further improvement in the labor market." The other two completely gave in to "Let's pretend."
The Bloomberg report may have stuffed words into the mouth of a financial strategist in promoting that meme (bolds are mine throughout this post):
U.S. economic data might look good, but it’s the path ahead that matters, and there are now risks to the outlook, said Brian Jacobsen, who helps oversee $250 billion chief portfolio strategist for Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin.
“The Fed isn’t beholden to China,” Jacobsen said. “Global conditions matter for domestic growth and inflation. A data-dependent Fed is one that is looking ahead, not behind."
Let's just say that it's quite curious that the "data might look good" assertion, which appears to be attributed to Jacobsen, isn't a direct quote, while other statements are.
The ultra-low loan rates the Fed engineered were intended to help the economy recover from the Great Recession. Since then, the economy has nearly fully recovered even as pressures from abroad appear to have grown.
The continuation of the Fed's ultra-low-rate policy likely means that rates on mortgages and car loans will remain low. That could help maintain steady economic growth and hiring in coming months.
Crutsinger's contention that the U.S. economy "has nearly fully recovered" is a sick joke.
During and after the recession, millions of Americans slipped into Census Bureau-defined poverty, as that rate rose from 12.5 percent in 2007 to 15.1 percent in 2010. As the bureau reported on Thursday, through 2014 only 12 percent — 0.3 points of that 2.6-point increase — has been recovered.
During and after the recession, median household income fell by 8.3 percent (from $57,357 in 2007 to $52,605 in 2012). The Census Bureau's Thursday report told us that only 22 percent of that loss (the $1,052 increase from 2012 to 2014 seen at the link divided by the just-mentioned $4,752 decline) has been recovered.
No other post-World II post-recession performance has been this miserable in these two areas.
When did 12 percent and 22 percent recoveries in the arguably two most important economic metrics as applied to U.S. individuals and families come to represent "nearly full"?
Commenting on the Census Bureau's income and poverty report, a separate WSJ editorial used a dozen words describing the Obama era readers should sear into their memory banks and hammer into their liberal friends' heads: "No President has done worse by the middle class in modern times."
The originally cited Journal editorial told us that the Fed has stopped pretending that the days of acceptable economic growth are coming back any time soon. For years, the Fed has predicted that growth rates of 3 percent or so are just a year or so down the road. That's no longer true:
The Fed predicts a stronger economy and rising inflation next year, but somehow they never arrive. And sure enough, the Fed’s governors and bank presidents on Thursday again downgraded their median economic projections for real GDP growth in 2016 (2.3%), 2017 (2.2%) and even 2018 (2%).
The AP's Crutsinger would call this a continuation of "steady economic growth."
First, it hasn't been genuinely steady, as the economy has turned in two quarters of contraction (Q1-2011 and Q1-2014) since the recession officially ended in mid-2009.
Second, since when did steadily historically lousy become an acceptable result? The answer to that question is apparently: "When your goal is to deceive instead of to inform."
Cross-posted at BizzyBlog.com.