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Sequester Helping?

10:35 AM, May 3, 2013 • By DANIEL HALPER
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The Fed earlier this week blamed sequester for the economy faltering. As Forbes reported then:

In their statement, FOMC participants spoke of “moderate” expansion in economic activity and continued, albeit slow, improvements in labor market conditions.  The Fed recognized the economy isn’t moving as fast as it would like, blaming Washington directly for that.

“Fiscal policy is restraining economic growth,” the FOMC statement read, referring directly to the impact of sequestration on the economy.  Indeed, economic growth remains subpar with GDP growing 2.5% in the first quarter, while the private sector added a meager 119,000 jobs in April, as my colleague Abram Brown reported.

But only days removed from that assessment, the news is the opposite; we're now hitting record highs. "U.S. stocks rallied to all-time highs, briefly pushing the Dow industrials above 15000, after April job-growth data handily beat expectations," reports the Wall Street Journal.

"The Dow Jones Industrial Average hit 15000, up 169 points or 1.11% in midmorning trade, before retreating slightly.

"The Standard & Poor's 500-stock index rose 17 points, or 1.1%, to 1615, topping the psychologically significant 1600 level for the first time—13 years after it surpassed the 1500 level. The Nasdaq Composite Index climbed 43 points, or 1.3%, to 3383."

So if the conditions haven't changed, but the results are different, could the conclusion drawn by the Fed be wrong? Could the opposite be true? In other words, might the sequester in fact be helping the economy?

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