Tom Keene Talks to Economist Stephen Stanley

Tom talks with Stephen Stanley, chief economist at Pierpont Securities, about the third quarter, long-term trends, and structural unemployment

You’ve got a 1 percent view for growth this quarter?
I think the economy is just in a holding pattern. Consumers a little bit, but really mainly businesses, are sitting on their hands, waiting to see what happens with the election. You can see right now the business sector is just not spending.
What is a growth recession?
I would define that as an economy that has a positive GDP number but is growing below trend.
That’s where we are, isn’t it?
That’s pretty much where we are. There is some question as to what the trend is. And I think my sense is that maybe the trend is a little bit lower than it was before the financial crisis. This is the kind of thing you don’t really get a handle on until years into the future, when we have had lots of revisions to the data.
Are we suffering from structural or cyclical unemployment?
I think there is some of each. Some of the folks in the Fed have insisted that it’s pretty much all cyclical. I don’t agree with that. I think a lot of issues with the economy are—I might label them structural, but I wouldn’t label them inevitable. We have a lot of policy deficiencies right now. In one sense, you can call the job problem structural in that it is not conducive to easy solutions by monetary policy, which is the way the Fed thinks about structural vs. cyclical.

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