Positive Indicators

http://jubakpicks.com/2011/11/18/economists-raise-forecasts-for-fourth-quarter-u-s-growth-and-heres-why/?utm_source=Jubak+Alert&utm_medium=email&utm_campaign=41b21cfbf6-RSS_EMAIL_CAMPAIGN

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"We throw all our attention on the utterly idle question whether A has done as well as B, when the only question is whether A has done as well as he could." (William Graham Sumner)

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Speaking of "potential," it's nice to see somebody as good as Jim Jubak writing about positive economic indicators.

Jubak's perspective is that economists continue to increase their projections for U.S. economic growth in the fourth quarter of 2011 despite the euro debt crisis. He refers to the Conference Board's Index of Leading Economic Indicators which climbed 0.9% in October. That's the biggest jump since February.

JPMorgan Chase has raised its forecast for 4th quarter U.S. growth to 3% (from 2.5%).

Actual data on building permits was much stronger than forecast at 10.8% versus the 1.5% predicted.

So, Jubak asks, why is U.S. economic growth accelerating when the EuroZone is in a crisis that is pointing to a recession in 2012? According to Jubak, it largely has to do with U.S. exports. While places like Germany export 41% of GDP, the U.S. exports 11% of GDP. As everybody knows, the U.S. economy depends on the U.S. consumer.

And, even if this is a short term thing, it's good news.

What would be good long term is to do something about the home building overhang created by the worldwide financial crisis. I'm so glad that Tim Geithner decided to save Citigroup (a monstrosity that by it's very make-up begged to be taken apart) even though he was outvoted on the president's economic council (a "vote" which included president Obama). The money that saved the banks could have been targeted at saving mortgages and tightened up a market that included multiple home buying speculators (destroy the houses if they're empty and unsold); reduce the principle in mortgages that existed in markets that cratered; engage experts in the housing area (Shiller, perhaps) to talk about "where" to spend the wasted Citigroup money. When the housing market comes back, "home equity" comes back. When home equity comes back, consumer spending comes back.

(Just a quick aside on Citigroup: we, the taxpayers, bail them out and with millions of dollars of the bail out money, Citigroup pays "lobbyists" to work on striking down any new laws that would limit their freedom to do what they do. Really.)

Now, as to 2012, just tell me how many cars are going to be sold (the auto companies project each month) for the year. Then tell me the rate of sale of previously owned homes on a percentage basis, projected. Then tell me the projected unemployment rate for 2012 (the standard, currently 9% rate often quoted and the "real", or U6 rate, roughly 16.5% right now). Give me approximations and I'll tell you what the economy is going to do.

Since I see no sign that anything is going to happen beyond the short term euphoria that Jim Jubak and I share, I could easily see another 4 or 5 years of slow or no growth in the U.S. economy. By that time, Tim Geithner will be "presiding" as vice chairman of Citi and pontificating about important banking issues.