Which Economy Is Pursuing Procyclical Fiscal Policy?
Today the BLS reported that the US unemployment rate dropped to 8.3% in January 2012. This is the lowest measured rate since February 2009 – a local trough. Also this week, Eurostat reported that the Euro area (EA) unemployment rate stabilized in December at 10.4%. This is the highest level since inception of the euro – a global peak (so far).
It’s pretty easy to see through relative labor performance which economy is pursuing procyclical fiscal policy, namely deficits rise when the economy is booming and fall when the economy is contracting: the EA.