The payroll numbers make Ben Bernanke look smart

Lots of gloomy Wall Street economists wrote explanations over the past couple days of why good employment numbers didn't mean the economy was doing better. They did that because payroll services company ADP estimated Wednesday that the economy added 130,000 jobs in January.

Ummm, not quite. Now the Labor Department has come out with its report, which says the economy shed 17,000 jobs. With total nonfarm payroll employment of 138.1 million, that's essentially no change at all, and with revisions sure to come as more data is gathered, one shouldn't read all too much into it. But it's definitely not a positive sign, and with last year's employment numbers revised downward in the new report and GDP growing at an estimated annual rate of just 0.6% in the fourth quarter, it adds to a picture of an economy that may already be in a moderate recession.

So the Fed should be cutting rates, which of course it has been doing with great vigor lately. The data do not show an economy falling off a cliff, though, so the arguments from some Wall Street types that the Fed should have gotten this aggressive months ago ring a little hollow.

The big challenge for the U.S. economy over the next couple of years is to find a way to navigate between a severe downturn on the one side and the inflation of some new kind of asset-price bubble on the other. In other words, a moderate recession, followed by an anemic recovery as American consumers slowly rebuild their savings. Could it possibly be that this is what Bernanke's Fed is delivering us?