Is the Economy Doing Well or Badly? - Brad DeLong's Grasping ...

Karl Smith:

Aggregate Demand in Real Life: [P]eople in general and managers in particular think of the market climate in terms of rates of change. Business is doing well if business is doing better. Business is doing poorly if business is doing worse. This is irrespective of where they are compared to some baseline. For example, you hear all up down the supply chain that hospitality is ?doing well." If you look at sales growth you see it right smack at you....

Business is doing better and better, anyone would say so. Good times.... [In levels it] doesn?t look so good. We are well below trend. Yet, that?s not how business feels. It is, however, how the job market feels....

The moral of all of this is that although the business headline seems to diverge from what people are experiencing on the ground the two actually line up perfectly. It's not that there is something different between what?s happening in the restaurant industry and what?s happening in restaurant employment. The difference is in how people look at the two. The restaurant business is ?doing well? that means growth rates are good. The economy is ?bad? that means employment is below trend. Both are true.

Source: http://delong.typepad.com/sdj/2011/05/is-the-economy-doing-well-or-badly.html

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