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Opinion | The Goldilocks economy: Trying to get it 'just right' – The Washington Post



As anyone who has ever pigged out on chocolate fudge can attest, it is possible to have too much of a good thing.

That’s true for a really rich dessert — and also a really strong (or hot) labor market.

When it comes to hiring, it’s a good thing for there to be lots of job opportunities for workers — particularly workers who usually don’t have much bargaining power. It’s a good thing for employers to be offering higher wages, especially for the lowest-paid, least-desirable jobs. It’s a good thing for businesses to be posting tons of job openings, especially when roughly 22 million jobs were destroyed very early in the pandemic.

Lately, as the May jobs report released on Friday shows, we’ve had these good things in spades.

We have now nearly filled in the deep jobs hole created by the pandemic. If May’s pace of employment growth (390,000 jobs added) continues, we’ll be back to the pre-pandemic level of employment in another two months or so. That would be much sooner than (nearly) anyone predicted.

Again, a good thing! Especially compared to the painfully slow recovery after the Great Recession.


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While we want a hot economy, and a hot labor market, there is also such a thing as “overheating.”

This could happen, say, because consumers have tons of cash to spend, and want to spend it (again, usually good things) — but suppliers can’t keep pace with customers’ super-strong demand for goods and services. They don’t have the capacity to scale up quickly enough. That mismatch can lead to rapidly rising prices and shortages of products. It can also manifest through shortages of workers, if businesses are trying so hard to scale up that they want to hire more people than are able or willing to work.

That has been the case for about the past year: Since May 2021, there have been more job vacancies posted at the end of each month than there were idle workers actively looking for jobs. In April 2022, the most recent month of data, there were about twice as many job openings as there were unemployed workers.

So even if every single unemployed worker suddenly got a job, there would still be tons of positions going begging.

One risk in a situation like this is a wage-price spiral. This occurs when companies chasing scarce workers decide to raise wages (again, usually good), but the resulting higher labor costs cause the companies to raise the prices they charge their customers. That, in turn, prompts workers — who, of course, are also consumers — to demand even bigger raises, which causes more price increases, and so on.

There has been some debate about whether we could be headed toward (or are already in) one of these dreaded spirals. There has also been debate over whether the Federal Reserve needs to act more aggressively to break or prevent such a cycle — specifically, by raising interest rates much more sharply than it already is doing.

That would have the effect of making it more expensive to borrow, which puts a damper on spending; but, historically, it has also usually led to a recession.

In April, Fed Chair Jerome H. Powell referred to the labor market as “too hot. It’s unsustainably hot.” He added that “It’s our job to get it to a better place where supply and demand are closer together.”

But that doesn’t mean he wants hiring or economic growth to come to a halt, obviously, or for the economy to crash. What he and other policymakers have been looking for — what could help them avoid having to raise interest rates more drastically — is sometimes called the “Goldilocks” economy: not too hot, not too cold. Just warm enough. Just right.

Powell and others have acknowledged that getting and staying on that “just right” path would be challenging. But at least based on the jobs report released on Friday, there is reason for optimism.

The report showed that job growth was strong, but a little bit slower than it was in April. Wages (at least in nominal, pre-inflation terms) are growing, but they’re not accelerating — if anything, they have slowed a touch. The report was “good but not gangbusters,” as Politico aptly put it.

Even more encouraging, more Americans who had previously been sitting on the sidelines entered the labor force in May.

This hopefully means that vacancies can get filled more quickly. Which, in turn, means companies can scale up production — whether of household appliances, construction materials, restaurant meals or anything else — to accommodate continued demand from customers.

To be sure, this is one month of data. There are still a lot of risks for the economy in the year or so ahead. These are driven by a combination of unlucky shocks (war and its resulting disruptions to energy and food markets; pandemic variants and related factory lockdowns; avian flu; drought; who knows what else) — as well as the (still unknown) ability of the central bank to nimbly calibrate its response. Raising rates just enough, but not too much.

A few more Goldilocks reports like May’s would certainly be welcome.

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Charting the Global Economy: Factories Slow Down From US to Asia – BNN



(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Manufacturing from the US to Asia is very much in a slowdown as factories continue to struggle with supply snarls, labor shortages and elevated materials costs.

A measure of US manufacturing activity weakened in June to a two-year low, and several regional Federal Reserve surveys indicated business activity shrank. Factory purchasing managers’ gauges across Asia eased, with South Korea, Thailand and India among those showing the biggest declines, according to S&P Global.

Similar indexes in Poland, Spain and Italy also showed weaker activity compared to May.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:


Consumer spending fell in May for the first time this year and prior months were revised lower, suggesting an economy on somewhat weaker footing than previously thought amid rapid inflation and Fed interest-rate hikes.

Regional Fed manufacturing surveys have taken on a grimmer tone, with four of five indicating business activity shrank in June. Separately, a measure of overall manufacturing slid to a two-year low as new orders contracted, restrained by lingering supply constraints and some softening in demand.

The pandemic housing boom is careening to a halt as the fastest-rising mortgage rates in at least half a century upend affordability for homebuyers, catching many sellers wrong-footed with prices that are too high.


Confidence in the euro-area economy slipped as households become more pessimistic amid fears a Russian energy cutoff will spark a recession. At the same time, they’re less worried about inflation than they were a month ago, though there’s a split between core and peripheral euro-area countries.

After suffering from unprecedented shocks in recent years, the UK is succumbing to more intractable problems marked by plodding growth, surging inflation and a series of damaging strikes.


China’s economy showed some improvement in June as Covid restrictions were gradually eased, although the recovery remains muted. That’s the outlook based on Bloomberg’s aggregate index of eight early indicators for this month. The overall gauge returned to the neutral level after deteriorating for two straight months.

Japan’s factory output shrank at the fastest pace since the height of the pandemic as the lagged impact of China’s virus lockdowns continued to disrupt supply chains and economic activity in the region. The weakness in manufacturing extended across Asia, particularly in South Korea, Thailand, India and Taiwan.

Emerging Markets

Colombia’s central bank delivered its biggest interest rate increase in over two decades. Policy makers are bracing for another spike in annual inflation that’s already above 9%. 

Two years after Argentina emerged from its latest default, a debt crisis in brewing once again. This time, the immediate trouble is in the local bond market, where creditors have become reluctant to roll over maturing government bonds.

Zambia’s inflation rate dropped below 10% for the first time in almost three years in June, bucking a global trend of record consumer-price growth. Optimism over the nation’s economy since the election of Hakainde Hichilema as president in August, a potential debt restructuring and a $1.4 billion bailout package from the International Monetary Fund has seen a rally in the local currency, which has helped contain prices.


Differences in underlying inflation trends call for different policy outlooks among the world’s top central banks, according to Bloomberg Economics. The Fed will have to go well into restrictive territory, the Bank of England may go a little above neutral and the European Central Bank might not even get that far.

©2022 Bloomberg L.P.

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Quarterly Investment Guide 3Q 2022: US economy on shaky ground – CNBC



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Minister Of The Economy Franz Fayot On Luxembourg’s Transition Towards A Green Economy – Forbes



Just last week, Luxembourg’s Minister of the Economy, Franz Fayot, came to the cities of Toronto and Montreal as part of an economic mission organized by the Luxembourg Chamber of Commerce in close cooperation with the Ministry of the Economy. I had the opportunity to sit down with Minister Fayot at the InterContinental Toronto Centre, and get some insights into the Grand-Duchy’s economic transition towards sustainability.

A transitioning economy

With up to one-third of its GDP related to the finance sector, Luxembourg’s economy is widely dominated by the financial sector. However, the past 20 years have been characterized by a push for economic diversification, and increased transparency and regulations following the financial crisis, said Minister Fayot.

“What we are trying to do is diversify [the economy] even more into new sectors to make us less dependent on the financial sector and adaptable to new circumstances,” he said. “We are also more and more developing a green finance sustainable finance sector, which is doing very well.”

A green state responsibility

Minister Fayot, whose guiding principles are a strong welfare state and sustainability, firmly believes that the government must assume its pivotal role in shifting the economy towards sustainability — “both in terms of environmental sustainability, but also social sustainability,” he added.

In June 2020, an international consultation was launched to gather strategic spatial planning project ideas considering the climate-related challenges and social issues, and support for the country’s ecological transition towards a zero-carbon territory by 2050.

“We need to understand that we have to help businesses innovate, and invest in the future,” said Minister Fayot.

A rising startup ecosystem

Luxembourg has seen a steady growth in startups over the past decade.

Earlier this year, the Ministry of the Economy launched a strategic initiative aimed at providing a thorough understanding of the startup ecosystem based on data analysis and interviews with key stakeholders.

Luxinnovation, the national innovation agency, identified over 500 active startups offering innovative digital and data-driven solutions in its latest mapping.

These assessments will also provide relevant comparisons with international markets, and aim to identify the necessary next steps for development opportunities in the upcoming years.

“Our innovation agency is there to guide startups, but also other more established businesses, to get access to grants,” explained Minister Fayot. “We have a state aid framework in Europe which we have to comply with, but the main message is that there is an obvious need to co-finance innovation, particularly in times when we are in this transition towards a more green economy.”

Going above the limits of territory

Surrounded by Belgium, France and Germany, Luxembourg is one of the smallest countries in the world — slightly smaller than Rhode Island. Yet, despite its dependence on its neighboring countries’ energy supplies, it is making continuous efforts to increase its share of renewable energy by also investing in projects across its borders, said Minister Fayot.

“We don’t have that much sun in Luxembourg, and we don’t have an unlimited space to build wind power,” he said. “It’s a bit of a limiting factor, but it shouldn’t excuse anything.”

“We are investing a lot into energy efficiency,” he added. “We are trying to get people to e-mobility and pushing for geothermal heating and energy in new constructions.”

A growing space sector

Luxembourg might not be the first to come to mind when we think of space, but, the country owns one of the world-leading satellite operators, and is increasing its investment into space resources.

“The is an initiative that we launched about six years ago, and it is very much focused on the space resources segment of the space industry,” he said. “We are not launching anything in space out of Luxembourg, but focusing on services like space traffic management.”

As part of the economic mission, a group of space companies participated in a distinctive program set up by the Luxembourg Space Agency in collaboration with the Canadian Space Agency. This included on-site company visits, workshops and B2B opportunities that led to the signing of a Memorandum of Understanding between the two national space agencies.

Stephanie Ricci contributed to this story.

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