Tags: paul | Krugman | dollar | us | economy

Krugman: Weak Dollar Creates Jobs, Just What US Needs

Monday, 23 May 2011 09:25 AM

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The weaker dollar will benefit the U.S. economy by making the country's exports more competitive abroad, says Nobel economist Paul Krugman.

Greater demand abroad for U.S. goods is boosting manufacturing here at home, even if just a little, which in turn can create jobs and fuel more economic growth.

"First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed," Krugman writes in his New York Times column.

Paul Krugman
(Getty Images photo)
Some politicians have been calling for the Federal Reserve to strengthen the dollar, which Krugman says could hurt a rebirth in manufacturing might.

"So while we still have a deeply troubled economy, one piece of good news is that Americans are, once again, starting to actually make things."

The Federal Reserve has stuck with very loose monetary policies in spite of criticisms that doing so keeps the dollar weak and inflationary pressures rising.

"The recovery remains moderate and we still have a considerable way to go," New York Federal Reserve Bank President William Dudley, who is seen as one of the more dovish Fed officials, according to Reuters.

However, more and more jobs are being created and overall economic improvement should continue.

"The labor market has shown further improvement," Dudley says.

"I am hopeful that job growth will continue to strengthen in coming months."

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