http://www.nytimes.com/2011/04/29/business/economy/29econ.html?_r=1&nl=todaysheadlines&emc=tha2
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"We all live under the same sky but we don't all have the same horizon." (Conrad Adenour)
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So, when last we posted, Nassim Taleb (he of the "Black Swans") had volunteered in his Wharton interview that building "robustness" was the key to keeping economies healthy. He went on to say that we're not in a "recovery" now: "We did not have a recovery. What we had was a massive reliance on the printing press for money ... so we are fooling ourselves with the numbers ... [this is] sort of like Madoff style growth."
Today's report in the NY Times that first quarter GDP growth was 1.8% (after 3.1% growth in the fourth quarter of 2010) would seem to fall in line with Taleb's perspective. The Fed's efforts to spend (QE2) and talk positively (Bernanke's press conference this week) are everything that could be done with "monetary policy." Some economists point out that what the Fed can do is prevent deflation (which it has by throwing money at a very bad situation) but it can't create GDP growth where it's not there. The Fed cannot substitute for capital investment that isn't happening from Top 500 companies - reports of all time record cash levels keep coming in which only support the fact that that money isn't being invested back into the economy.
The 2011 payroll tax cut which was intended as a consumer spending stimulus has been completely neutralized by commodity price increases (especially at the gas pump). Crude oil prices are up 32% over the last 3 months.
On the positive side, there has been an early sign of higher capital spending in business: equipment and software purchases have grown for 8 consecutive quarters. However; some of that software purchasing is for programs that substitute for people so it's not all rosy. Private sector additions of 216,000 jobs in March are certainly a positive sign. Anything over 200,000 in a month is a good sign. But, over 300,000 per month would be what's needed.
Goldman Sachs projects 4% GDP growth in the second quarter. That's the most positive news. Why? Because, whatever else you might indict them for, they know how to make money (and where). Hopefully, they're right.
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Let's keep our fingers crossed for the higher GDP growth!
ReplyDeleteWhat's interesting is what you say about the software purchasing replacing jobs - you have to remember that we need people to build the software.
I just started reading Seth Godin's Linchpin (amazing book!) and here are some quotes about those jobs being replaced:
"Why hire a supertalented pin maker when ten barely trained pin-making factory workers using a machine and working together can produce a thousand times more pins, more quickly, than one talented person working alone can?
For nearly three hundred years, that was the way work worked. What factory owners want is compliant, low-paid, replaceable cogs to run their efficient machines. Factories created productivity, and productivity produced profits."
What we're losing are those mindless jobs. There is an amazing opportunity on an individual level for each of us today to do something great, but it's not a boring, dead-minded, run of the mill job.
Marcelo: thank you. Very well put. I'm not even saying that the spending on programming instead of people is wrong - I'm just saying it's a fact. Even more interesting (at least to me) is the looming worker shortage that was referred to in the NY Times (Education Life 4/17/11) recently: when experts look at the BLS list of fastest-growing occupations, they see thousands of jobs on the horizon by 2018, and a worker pool that may not be trained to fill them. They called it a "Top 10 List."
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