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Recent economic outlooks and Friday's jobs report from the U.S. Department of Labor offered a mixed bag of good and worrisome news. Taken collectively, however, they offered more evidence that it would me a major setback if Congress and the president fail to reach a deficit-reduction deal and allow the fiscal cliff of tax increases and large, indiscriminate budget cuts to kick in at year's end.
While some have noted that the economy should not, mathematically at least, immediately feel the impact of the tax hikes and budget cuts, the specter of another Washington failure will be damaging. Going off the cliff will disquiet financial markets, make small and large businesses alike less likely to invest and expand, and quite likely shake consumer confidence. And there is no guarantee a new Congress, which if anything appears to be more politically partisan in both the Democratic-controlled Senate and Republican-controlled House, will be any more likely than the lame-duck Congress to reach a deal.
The recovery, while sustained with 33 straight months of job growth, also remains fragile and not terribly robust. A needless setback will only dig a bigger economic hole to climb out of. Conversely, an agreement that demonstrates Washington is not dysfunctional after all, could spur economic activity and accelerate the recovery.
Friday's report showed the economy added 146,000 jobs in November, more than most economists had forecast, and the unemployment rate dropped to 7.7 percent, the lowest since December 2008. But the economy has a long way to go. Three years of job growth has added back only about 4.6 million of the 8.8 million jobs lost during the Great Recession.
Also last week the New England Economic Partnership released its four-year economic forecast and it offered more good news/bad news. The Connecticut economy will see slow growth for the next couple of years, adding about 10,500 jobs, predicted Ed Deak, a professor emeritus of economics at Fairfield University and the economist who prepared the forecast for the partnership. Mr. Deak sees the economy breaking out in 2014, with Connecticut adding 22,300 and by 2016 finally returning to pre-recession job levels.
Moody's Analytics issued a forecast with similar trend lines, but was more bullish, predicting 29,000 jobs added in 2014 as the economy takes off. Moody's warned, however, that the failure to get a debt deal would slow recovery progress and that Connecticut and much of New England would be particularly vulnerable.
Economic forecasting may be perhaps the most inexact of sciences, but evidence grows that the nation is poised to revive from its long economic malaise, if only the politicians can manage not to get in the way.
The editorial board is composed of the publisher and four journalists of varied editing and reporting backgrounds. The board's discussions and information gained from its meetings with political, civic, and business leaders drive the institutional voice of The Day, as expressed in its editorials. The editorial department operates separately from the newsroom.