Friday, February 02, 2007

News of the Week from Macroland

One primary focus of Econ 2 online is to explain what causes macro numbers such as the GDP, unemployment rate, inflation, interest rates, exchange rates, etc., to go up and down (positive economics). Recent economic indicators have been mixed

This week there was a glut of news about the state of the overall economy. On Tuesday the government reported the economy’s GDP (Chapter 7) grew at a healthy 3.5% annual rate in the fourth quarter of 2006. A surge in consumer spending, helped by falling energy prices, boosted GDP growth.

Not long after that the Federal Reserve (Chapter 12) left the target for short-term interest rates at 5.25% for the fifth consecutive meeting. In a statement released after their meeting, the Federal Reserve Open Market Committee (FOMC) seemed more optimistic about both growth and inflation than the last time that it met in December. The central bank said its major concern is in the firs part of 2007 is inflation.

On Thursday, February 1, the Commerce Department announced the personal savings rate for American households for 2006. It wasn’t pretty. The personal savings rate is at its lowest level since the Great Depression of the 1930’s.

Finally, today on Friday, we got the Employment Situation Summary or jobs report for the economy. Overall we saw job modest growth in January, but things weren't so great in the manufacturing sector. Employers added 111,000 jobs to payrolls last month, according to the Labor Department report, down from a revised 206,000 jobs in December.
Extra Credit:
Today there are two extra credit questions. Answer only one if you are interested in earning extra credit.

1. What was the personal savings rate for all of 2006? What does this mean for our economy?

2. What was the overall unemployment rate in January 2007? Is the unemployment rate going up or down?

If you are the first student to send me an e-mail to with the answer to one of the questions, you will be rewarded with two extra credit Discussion Board points. Only two points extra credit per student can be earned in any given week from the blog questions.

No comments: