The Federal Reserve, which through its control of the money supply is in charge of one of the key levers for regulating the pace of economic growth, is guided by a dual mandate over inflation and unemployment. If consumer prices begin rising too fast, the Federal Reserve will act to slow economic activity. Likewise, when unemployment rises, the Federal Reserve will act to boost economic growth.
On Wednesday, the Federal Reserve acknowledged that the economy appears to be growing more slowly than anticipated but opted to take no steps to boost growth. This decision elevated concern about the potential of future inflation over the currently high U.S. unemployment rate of 8.2% (Pennsylvania's rate is 7.5%).
Last Thursday, the Pennsylvania Department of Labor and Industry (L&I) reported that unemployment edged up slightly to 7.5%, while nonfarm payrolls grew at a healthier pace, adding 14,600 jobs in June (here is the graphy summary form L&I).
The idea of expansionary austerity is that in the midst of high unemployment, the public sector can reduce spending and unleash an explosion of economic growth that leads more quickly to recovery (Dean Baker explains here).
The United Kingdom has been putting this idea into practice since 2010 when a new government was elected. Today, we got more results on how that is working out: the UK economy has now shrunk for three consecutive quarters and is now smaller than when the current government took office.