http://www.nytimes.com/2010/07/31/business/economy/31econ.html?_r=1&emc=eta1
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"You can't find the right answer if you're asking the wrong question." (John C. Maxwell)
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We're into August now and that's certainly enough time to look back at 2010 so far and see what the facts are. As Catherine Rampell reports, the economic recovery in the U.S. has slowed. The economy has been growing for a year but jobs, not so much. The growth rate for the second quarter is now "officially" 2.4%.
Rampell quotes Prajakta Bhide, a research analyst at Roubini Global Economics, as saying that the rest of the year is "... going to feel like a recession." So, we've had quarterly economic growth at 5% year end 2009, 3.7% for the first quarter of 2010 and now 2.4% for the second quarter. If we draw a trend line thru that data, do we get to Rampell's reference to several economists suggesting that 1.5% growth would be good for the second half of this year?
Since we need 2.5% GDP growth just to keep the unemployment rate where it is (Christina Romer, chairwoman of the president's Council of Economic Advisers), finding adequate stimulus somewhere would appear to be a priority. This perspective only underlines the Krugman/Buffet arguement, mentioned here more than once, that the original stimulus measures would not be enough. And, they weren't.
Business, which appears to be investing more in equipment than hiring (and, as we mentioned a while back, Zakaria's fact-based perspective is that Top 500 capital money is waiting on demand to return, so whatever investing is going on in "equipment", it isn't what it could be), isn't helping with consumer demand. Business is, in fact, waiting for consumer demand. Yet, if "business" isn't hiring much, business is going to have a long wait. Further, we've seen no sign that small business is getting the loans it needs for growth and that's where most of the jobs are created. Does this appear to be a "vicious circle"?
Interestingly, the attachment to Rampell's article shows revised official U.S. data for GDP growth over the last three years (into 2010 so far) producing a trend line that is actually "worse" than originally thought to be the case for the Great Recession. There is no other conclusion to come to but that we were even closer to the "brink" of a depression that we thought at the time.
So, that old "lagging indicator" that we have often referred to, unemployment, doesn't seem to be getting any better. And, that pernicious housing market hasn't come back yet. Until something positive happens there, we won't see much GDP growth.
On the positive side, there appear to be reports from Bloomberg that global merger and acquisition (M&A) activity may be picking up in the second half of 2010. There have been 787 announced deals since July 19 with a total disclosed value of $86.4 billion. That surge caused global deal volume to pass the $1 trillion mark for the year, more than a 10% increase over the first 7 months of 2009.
Raju Shukla, head of Barclay's Capital India, was quoted today as saying that the "market hiccups" due to the European crisis are fading. Ironically, one of the larger contributions to European M&A activity for the second half of 2010 will be BP's sale of assets to Apache (at least $7 billion and could end up being more), as part of BP's overall effort to raise cash to pay for spill clean up.
Alan Greenspan, appearing on "Meet the Press" yesterday, characterized the housing situation in the U.S. as crucial. His perspective is that, if housing prices can stay stable, we can skirt the worst of the housing problem - but, right under the current price level (mainly 5, 7 or 8% below), is a very large block of mortgages which are, or could be, under water. This would feed right into Ben Bernanke's testimony last month before Congress that the economic outlook is "unusually uncertain." Greenspan's characterization that any recovery we've seen so far, since the current recession's probable end, has been limited to large banks, large businesses and high income individuals seems to resonate with what other economic data show.
To characterize Greenspan, any pause in a modest recovery feels like a quasi-recession.
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I can't argue against the numbers - but I'm curious as to WHERE the unemployment is. At my company, we're struggling to find qualified candidates to fill jobs (in my experience at least). Most of the jobs are more technical in nature (developers, designers, etc.), but still - the way unemployment is, you'd think people would be knocking down our door to get a job.
ReplyDeleteI wonder if it tends to be confined to certain areas of the country or to certain job types. If there was higher unemployment in manufacturing, I'd say it makes sense.
People aren't going to apply for jobs they patently aren't qualified for, so I think your anecdotal evidence is a little skewed. Your later supposition makes more sense though, the problems are definitely regional (Texas has it easy compared to some other states) and by job sector (as you said, manufacturing's pretty lousy).
ReplyDeleteCurrently there are 5 unemployed people for every job that becomes available. That doesn't sound like a lot, until you realize people apply for more than one job. Assuming you apply for 10 jobs in a week (and others do too) that means for every interview you hit, there are 50+ applicants for it. As more new jobs are added, so are more newly unemployed.
It's ugly out there. Blaming the unemployed (not saying you are, but I know some congressional leaders are) is just kicking someone while they're down.
14/15 million people unemployed and a real unemployment rate of 17% is a disaster and more like the 25% unemployment during the Great Depression than the 4% we were used to over recent years. We may never get back to the 4%/5% unemployment (which was considered full employment) rate that was considered the norm. And, we now have Christina Romer who, as chairwoman of the President's Council of Economic Advisers, pronounced the "stimulus" as enough to keep unemployment from going above 8%, resigning this week. Was it President Clinton's campaign that pronounced: "It's the economy stupid!" Is there more to say?
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