Last week's US jobs report (the number jobs created by the US economy in April) made interesting reading. This is one bit of data that can be used to judge the health of the American economy and the progress the US is making as it emerges from the sharpest fall in its GDP in living memory.

The jobs report data was disappointing with only 266,000 jobs created in April instead of the 900,000 - 1,200,000 forecasted. Many analysts were expecting stronger job creation figures as a result of the Biden administration’s $1.9 trillion fiscal stimulus package. 

This piece of news brings into mind some interesting questions relating to the problems of applying expansionary fiscal policy to increase economic growth and reduce unemployment:

• Are US consumers reluctant to spend the extra transfer payments ($1400 per household) because they are lacking confidence due to job insecurity?
• Is the extra US government spending taking time to have any effect because of state managed bureaucracy?
• Is this just an example of the ‘time-lags’ associated with expansionary fiscal policy?

These questions can point towards some of the problems of applying macroeconomic policy and how it can lead to policy errors.

Could the poor US jobs data that has been jumped on by the media push nervous politicians into further stimulus action that could lead to an even bigger US budget deficit and trigger a rise in inflation?

Some suggested links:

Unit 3.6 Government management of the economy – fiscal policy 

Fiscal policy