Decades ago, the economist Arthur Okun — chair of the Council of Economic Advisors under Lyndon Johnson — advocated what he called a “high-pressure economy”. He meant one in which expansionary policies could create higher than average gross domestic product growth coupled with low unemployment, resulting in not only a strong economy, but also disproportionate job gains for more vulnerable groups.
This is exactly the kind of policy that the Biden administration has pursued, so far successfully. There were 353,000 new jobs added in January, twice as many as anyone expected, and the gains were seen across nearly all sectors and categories of labour. America has 1.4 jobs available for every unemployed person — far above the historical norm. That makes this the strongest labour market since at least the 1960s. All this, with inflation back at tolerable levels, and markets booming.
The US is enjoying, as Treasury secretary Janet Yellen recently put it, a revival that is “remarkable for both its speed and its fairness”. So, what’s not to like about the high-pressure economy? Nothing — except for the fact that the pressure points may not always skew to the upside. Because of the nosebleed level of the markets, the amount of fiscal stimulus in play, wildly unpredictable geopolitics and the fact that neither the 2020 recession nor the recovery have been historically typical, the high-pressure economy could easily blow off steam in either direction.