What first struck me about Georgi Kantchev and Evan Gershkovich’s report in the Wall Street Journal was the slug: “Investment is down, labor is scarce, budget is squeezed.” What struck me is that it could well be written about the United States. Business investment is down:
Labor is scarce:
That’s what a low unemployment rate means by definition. When the unemployment rate is low only a very small percentage of those who want jobs don’t have them. Do I need to comment on whether the budget is squeezed?
And yet I don’t believe that the U. S. economy is collapsing. Is Russia’s? I don’t think we can tell from reading the cited article. For example this sentence: “The country’s biggest exports, gas and oil, have lost major customers.” They’ve also gained major customers. Russian oil exports measured in dollars have actually increased since the invasion of Ukraine. The reason for that is that the price of oil has risen.
The sanctions imposed by Russia’s erstwhile trading partners are resulting in Russia being more dependent on China. Russia’s economy had approached autarky because of prior sanctions. I don’t think we know enough to make any sweeping claims about what will happen next with Russia’s economy. Don’t be surprised if the moment that shooting stops, German imports from Russia jump right back up.
Labor is scarce but the Fed has not been doing its job regarding employment? Oy. Anyway, Russia was and remains a closed society in many ways. Its hard for us to get a good idea of what is really going on since the government controls communications/media and important data. Individuals claiming to live in Russia send out widely variable stories so hard to sort that out. I think their neighbors are probably the best sources of info, excluding Ukraine right now, and they seem to be saying they have seen some negative effects but hard to quantify.
Have to wonder if Russia is really better off becoming dependent upon China. They dont really have much to offer beyond natural resources like oil, gas, mined stuff and maybe some agricultural products. They would clearly be the 2nd banana in the pair.
Steve
You’re the one who thinks that the Fed is doing its job if the unemployment rate is low rather than their statutory responsibility of maximizing employment not I. I’m just observing that a low unemployment rate means that labor is scarce.
I don’t think it is but I think that’s the way the path leads.