The Breakdown | Explaining Southern California's economy
Business & Economy

DeBord Report on 'America Now with Andy Dean,' April 6 edition

Here's my weekly segment on "America Now with Andy Dean." After a few minutes of banter about what a big Andy fan my mom has become, we get right to it: the March jobs report from the Labor Department.

Andy notes that if you compare Ronald Reagan's first term to Obama's, at about the same point for both presidents coming out of a recession, Reagan's economy was achieving 6 percent GDP growth while Obama's is barely managing 2 percent. Fair enough, but the Reagan recovery was the result of Paul Volcker, when he was Fed Chairman, inducing a recession to break the back of late-70s stagflation. He raised interest rates to a high of 20 percent to accomplish this. But by the end of Reagan's first term, the rates had been substantially cut. Combined with the the usual post-recession dynamics, this delivered pretty juicy GDP growth.

Obama's problem is that he's been dealing with a financial crisis rather than a typical post-war recession. Getting rid of the debt overhang from such an event can require a decade, during which growth and employment suffer. Plus, the Fed can't cut interest rates any further than where they are — effectively zero — so there's no stimulus to be gained there. 

That's the major difference for me on that front. We currently have what I call "stuckflation," a low-growth, low-inflation alternative to the the low-growth, high-inflation stagflation of the 1970s. I think it may have something to do with dollar depreciation — what Financial Times columnist Martin Wolf has argued is effectively a U.S. debt default — but I'm not sure. In any case, dollar depreciation has at least made U.S. exports more competitive, which along with the auto industry and Apple seem to be the only things keeping the economy from falling back into recession.

So disagreement there. But Andy and I agree that the bad March jobs report could be an indication than GDP growth is in danger of slipping back to 2011 levels, when it averaged 1.7 percent for the year. This would be a major problem and could indicate the economy is at risk of stalling.

On a lighter note, we also discussed the impending demise of the New York Times, which gave me a chance to try out my new theory that newspapers should have ignored the Internet completely. This might have cost them 50 percent of their profits, but by giving away their content and enabling the rise of an Internet news industry, they've put themselves in a position to go to zero. In retrospect, which would you choose?

There's a little Keith Olbermann-ology in the segment, too. Give it a listen!

And join us live next Friday at 4 p.m. Pacific Time for another weekly wrap-up of economic and business news.