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The Calm before the Storm?

This morning’s jobs report seemed to show a firming-up of the labor market, with the unemployment rate dropping a tad, from 9.5% to 9.4%. Job losses have slowed too, down only 247,000 in July.

But one month’s numbers do not make a recovery. I’m betting that this may be just a temporary pause before the labor market worsens again towards the end of 2009. What happened is that the government has poured an incredible amount of money into the economy, through both monetary and fiscal stimulus. Policymakers have managed to blunt the downward spiral, which is a tremendous achievement. No depression on Bernanke’s watch.

But consumers are still cutting back, and the personal savings rate still has more to rise. I would treat this as the eye of the hurricane, with more yet to come.

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