Halfway through 2004 seems a good time to review where the United States is on the economy and jobs situation.

Halfway through 2004 seems a good time to review where the United States is on the economy and jobs situation.

• Unemployment has remained at 5.6 or 5.7 percent since the beginning of the year. Over the past six months, employment growth has moved solidly into positive territory, but not enough to put a major dent into unemployment. The labor market continues to remain well below peak levels.
• Gross Domestic Product grew at a revised 3.9 percent annual rate in the first quarter of 2004, down from the original estimate of 4.5 percent. While growth in overall economic output appears to have largely recovered, risks remain to the overall economy -- especially due to increases in oil and gas prices, as well as an up-tick in inflation, now running at about 3 percent.
• The recent growth, however, has not been beneficial to many workers. As a share of total output corporate profits are at record highs, while labor compensation is at 38-year lows.
• The Federal Reserve Board of Governors' Federal Open Market Committee (FOMC) is meeting in the next few days to decide the course of monetary policy. While interest rates have remained at historic lows for a significant amount of time, it is widely expected that the FOMC will decide to raise interest rates by at least a quarter of a percentage point, and perhaps half a percentage point. This shift in policy will likely be the first in a series of moves to launch a preemptive attack on increasing inflation, which as noted has begun to tick upward in recent months.
• It appears that recent legislative attempts to graft expansion of the debt ceiling on the defense authorization bill have failed. Congress will have to revisit the debt ceiling issue, as total borrowing will cause the government to reach the statutory limit later in the summer or fall. In addition, recent remarks by Fed Governor Edward Gramlich cited the recent increase in the deficit -- now around $500 billion per year -- as a potential drag on the economy.

A final tidbit: As highlighted by Lewis Black on The Daily Show with Jon Stewart [Link -- click on Reagonomics video] -- The head of the Ronald Reagan Legacy Project and ubiquitous conservative Grover Norquist recently argued on CNN that Reagan ought to replace Hamilton on the $10 bill, in part since Hamilton is "of all the people on the currency, the only one who isn't a president." As Black delicately responded: "I'll bet you $100 that you're wrong."