Despite crises abroad, the U.S. economy is starting -- if barely -- to pick up speed, with the Federal Reserve forecasting growth of over 3 percent of GDP and unemployment dropping to just over 9 percent by the end of the year. While neither of these are stellar numbers, or match what we've seen in other post-recession recoveries, it's the first time we've heard of unemployment actually shrinking by the end of the year rather than remaining plateaued at 10 percent.
Let's also look at this graph on the right, which shows a common measure of inflation, the Consumer Price Index. Its increase has been minuscule over the past year, indicating once again that the United States is not in a position to panic about the effect of debt levels on its interest rates. This month we've actually seen deflation, suggesting that setting a higher inflation goal as part of aggressive monetary policy is a good idea to help expand employment more quickly. Unfortunately, that's not going to happen.
All this as debt concerns in Europe actually led to a somewhat stronger U.S. economy by increasing investment in our safe Treasury Bonds and lowering the price of oil. True, there are negative factors -- an over-valued dollar, the risk of panic in international financial markets -- that require attention. But thus far, we've managed to escape unscathed from the contagion.
-- Tim Fernholz
