28 November, 2021

That’s Because Many Blue States Have Done Everything Possible to Stifle Economic Recovery

As Fed Contemplates a Move, Democratic States Lag Furthest in Jobs Recovery (freebeacon.com)

Data released on Friday show that through October employment in states with Republican governors was close to 99 percent of what it was in February of 2020, while Democratic-led states lagged, at roughly 96 percent.

While state-level estimates can be volatile, particularly month to month, the apparently larger remaining job shortfall in Democratic-leaning areas echoes the choices—and political divisions—that emerged early in the pandemic. States in the Northeast and mid-Atlantic tended to impose stricter measures against the coronavirus and keep them in place longer, than Republican-led states in the South and West.

Employment fell more sharply in those areas, and the gap has remained even late in the recovery.

Neither 99% nor 96% is that great. Population is growing all the time. A full recovery would have > 100% just about everywhere by now.

Until recently it seemed the Fed was intent on keeping monetary policy loose and borrowing costs easy for as long as it took to claw those jobs back.

That aim may now be in conflict with the Fed‘s other goal of stable prices, challenged by a run of inflation that is prompting central bank policymakers to discuss a faster move to tighter policy—which could slow job growth before areas central to Biden's political chances are able to catch up.

That fed policy is one of the key contributors to the rise in inflation. It was always a danger of this loose policy, but other factors kept it in check. These other factors are now gone, and we have contributing factors to increase inflation, such as the global supply chain issues.

The high inflation rate, which has persisted longer than policymakers had anticipated, is damaging Biden's approval ratings and elevating the importance attached to his choice of central bank chief.

It’s amazing that policymakers anticipated it going down sooner. They have done nothing to help lower the rate, and in fact have done things to help increase it.

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