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Who’s afraid of deflation?

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christopher_swann1.jpgFor most policymakers, deflation is the stuff of nightmares — scarier even than bank failures and stock market collapses. As the economy stumbled, deflation became Lords Voldemort and Sauron rolled into one.

In recent months, however, this economic supervillain seems to have lost its power to intimidate.

With growth reviving, many economists now believe that deflation is highly unlikely to materialize.

Another group suggests that deflation is not nearly as nefarious as often portrayed. Since falling prices are not generally associated with depression, we were wrong to be frightened in the first place.

The government’s foreclosure flop

The Obama administration has attacked the problem of rising home foreclosures with a humanitarian zeal. Their program — the most ambitious in generations — was intended to save up to four million people from being thrown out of their homes.

A few months on, this $75 billion policy has been a humiliating flop. Only about 270,000 mortgages have been modified since the scheme was announced in February, according to government figures, and if past experience is anything to go by, half of those could be delinquent again within six months.

Bernanke: Back to Clark Kent

Having averted a disaster, cartoon superheroes typically revert to their bland civilian identities. With the recession loosening its grip, Ben Bernanke is trying a similar trick.

After a period of heroic boldness and creativity, the Fed is determined to be dull. Wednesday’s statement from the Federal Open Market Committee may well be calculated to bore.

from Rolfe Winkler:

Beware the government’s job figures

In a phone conversation yesterday, John Williams at Shadow Government Statistics warned me not to read too much good news from the better-than-expected jobs figure.  The government's seasonal adjustments aren't, well, adjusting properly.  They're still keying off "typical" fluctuations in employment.  But of course today's economic climate is anything but typical.  Yesterday the official unemployment rate ticked down a tenth of a percent to 9.4%, but according to Williams it should have ticked up a tenth of a percent to 9.6%.

There are big seasonal changes in employment that the Bureau of Labor Statistics corrects for in order to reduce the volatility of the unemployment rate.  For instance, each year employment spikes ahead of the holidays as companies add workers, and then drops as those workers are let go.

Bracing for a glut of leisure time

The United States has been labeled “no vacation nation.” Americans are notoriously diligent compared with citizens of other rich nations — putting in long hours and often not even using the skimpy vacations to which they are entitled.

Now more Americans are being forced to take it easy. Even for those who are keeping their jobs, many companies are cutting hours and imposing “shotgun” vacations in an effort to economize.

Can good numbers be bad news?

Barring any unexpected stumbles, and revisions aside, today will be the last time this year that Americans are told their economy is shrinking.

Indeed, the modest one percent decline in second-quarter gross domestic product could be followed by growth rates as high as three percent in the final six months of the year.

The danger of a lost generation

– Christopher Swann is a Reuters columnist. The views expressed are his own —

NEW YORK, July 24 (Reuters) – For the first time in three generations, Americans across the nation are facing the threat of long-term unemployment. Already more than one in four jobless Americans have now been out of work for more than six months, the highest level since records began in 1948.

L-shaped housing market?

Economists seem willing to celebrate even the most tepid economic release these days. The National Association of Homebuilders’ Housing Market Index nudged up slightly to 17 in July, up from 15. Most economists had expected 16, so this is what passes for good news.

But the improvement is tepid indeed considering the record lows the index has hit. Even most dead cats bounce more vigorously than this.

Gloomy employment milestones

There is normally something for both optimists and pessimists in the monthly employment report.

When the payroll figures are disappointing, the unemployment rate is frequently better than expected. This month is no exception. While payrolls plunged by nearly half a million, unemployment barely budged.

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