Sunday, May 05, 2019

Economic Stimulus US and China


Economic stimulus measures on the part of the government in Beijing appear to be having a positive effect on the giant Chinese economy.

It appears that the US economy is still growing steadily, although not as strongly as it was last year (2018), when the tax-and-spending stimulus kicked in.

Looking toward November, 2020, a key question is how long this “virtuous cycle” can last, and whether there is anything on the horizon that could send the economy into a pre-election tailspin.

A factor that has certainly helped to keep inflation quiescent is stronger productivity growth.

When firms are getting more output from their workers, their over-all costs per unit of output can remain steady despite the fact that they are finally paying higher wages, so they don’t have to raise prices.

If productivity growth remains strong and unit labor costs don’t shoot up, the economy could continue to grow in a non-inflationary manner for some time, despite very low rates of unemployment.

Things could change, of course. A bolt from the blue could hit the stock market, which has been on a tear for most of the past decade and is now very highly valued.

Source: After a Strong Jobs Report, Economic Questions Linger for 2020, By John Cassidy, May 4, 2019 | THE NEW YORKER


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