Posts Tagged ‘U.S. economy’
ZERO HEDGE: What do the NAR, Consumer Confidence and CBO forecasts have in common? If you said, “they are all completely worthless” you are absolutely correct. Alas, the market needs to “trade” off numbers, which is why the just released CBO numbers apparently are important… And the fact that the CBO predicted negative $2.5 trillion in net debt by 2011 back in 2011 is largely ignored. Anyway, here are some of the highlights.
- 2012 Deficit: $1.1 trillion; 2013 Deficit: $0.6 – yes, we are cackling like mad too…
- Unemployment to remain above 8% in 2012 and 2013; will be around 7% by end of 2015; to drop to 5.25% by end of 2022.
- This forecast is utterly idiotic and is completely unattainable unless the US workforce drops to all time lows and the US economy generates 300,000 jobs a month for 10 years
- Needless to say, CBO assumes the best of all worlds in this meaningless forecast
- But here is the kicker: “Had that portion of the decline in the labor force participation rate since 2007 that is attributable to neither the aging of the baby boomers nor the downturn in the business cycle (on the basis of the experience in previous downturns) not occurred, the unemployment rate in the fourth quarter of 2011 would have been about 1¼ percentage points higher than the actual rate of 8.7 percent” translation: CBO just admitted that the BLS numbers are bogus and real unemployment is 10%.
BEN SAYS: Most respected economic forecasting models are now projecting 1.5 to 2 percent economic growth for 2012. Obama wants us to think this is the “New Normal.” Compare this performance to Reagan’s. After the Reagan tax cuts were passed in 1981, the U.S. economy grew 4.3 percent a year on average. The entire U.S. economy expanded by one-third during the Reagan era — which is the equivalent of adding the entire West German economy to the U.S. economy. Of course, liberals denounced the Reagan Era as the “Decade of Greed.”
The average yearly growth under Clinton was 3.55%. That’s good, but is nearly a full point behind Reagan. Also, Clinton was just a lucky beneficiary of Reaganomics. He kept the momentum going because Newt and the GOP Congress after 1994 forced Clinton to rein in spending, pass a capital gains tax cut, and enact Welfare reform. Clinton was a liberal, but not crazy Left the way Obama is. Clinton at least was not actively and consciously trying to destroy the capitalist system the way Obama is. Clinton was smart enough to keep the good times rolling. We also had sane monetary policies from the Fed.
WEEKLY STANDARD: Now that you have read the results of the various economic forecasting models that have served so many so badly in recent years—they are predicting the U.S. economy will grow in 2012 at an annual rate of between 1.5 percent and 2 percent—let me offer an alternative way of looking at things. It is called ‘pick your if.’
If you believe that the recent decision of the European Central Bank to make unlimited cash available to eurozone banks for the next three years, and that the meeting next week of German chancellor Angela Merkel and French president Nicholas Sarkozy will solve the problems created by excessive debt of some eurozone countries, you will heave a sigh of relief. You will then not have to worry whether the inevitable Greek default will be the first step towards a Lehman Brothers moment, with liquidity drying up, bank credit shrinking, and a deep recession settling over Europe, hurting American banks and exporters.
It’s so sad that America (once the envy of the world) is being reduced to an impoverished Third World country under Obama.
ASSOCIATED PRESS: Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income.
The latest census data depict a middle class that’s shrinking as unemployment stays high and the government’s safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families.
“Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too ‘rich’ to qualify,” said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.
“The reality is that prospects for the poor and the near poor are dismal,” he said. “If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years.”
Congressional Republicans and Democrats are sparring over legislation that would renew a Social Security payroll tax cut, part of a year-end political showdown over economic priorities that could also trim unemployment benefits, freeze federal pay and reduce entitlement spending.
NEW YORK TIMES: Are we heading into another recession now? Again, the consensus says we’re not.
But at least one organization with an exceptionally good track record says another recession may already be here. That is the Economic Cycle Research Institute, a private forecasting firm based in Manhattan. It was founded by Geoffrey H. Moore, an economist who helped originate the practice of using leading indicators to predict business cycles. Mr. Moore died in 2000, but the team he trained is still at work.
Relying on a series of proprietary indexes, the institute correctly predicted the beginning and the end of the last recession. Over the last 15 years, it has gotten all of its recession calls right, while issuing no false alarms.
That’s why it’s worth paying attention to its current forecast. It’s chilling: as bad as the economy has been, it’s about to get worse.
In the institute’s view, the United States, which is struggling to recover from the last downturn, is lurching into a new one. “If the United States isn’t already in a recession now it’s about to enter one,” says Lakshman Achuthan, the institute’s chief operations officer.
It’s just a forecast. But if it’s borne out, the timing will be brutal, and not just for portfolio managers and incumbent politicians. Millions of people who lost their jobs in the 2008-9 recession are still out of work. And the unemployment rate in the United States remained at 9.1 percent in September.
More pain is coming, says Mr. Achuthan. He thinks the unemployment rate will certainly go higher. “I wouldn’t be surprised if it goes back up into double digits,” he says.
At the moment, the institute is sticking its collective neck out.
Compare the institute’s forecast with the latest Blue Chip survey, which was released on Friday. In it, the consensus is that the economy is slowing, but still growing modestly, and that it will continue to do so. On average, the economists included in the tally foresaw a growth rate of 2 percent in 2012. In January, the consensus prediction for 2012 was a growth rate of 3.1 percent.
Economists have been ratcheting down their projections, recognizing that the recovery has been so weak that it won’t take much to set the economy back.
A dark cloud hovers over the euro zone. Greece is increasingly perceived as likely to default on its debt, causing as-yet-unknown problems for the global financial system. Spain, Portugal and Ireland are already in downturns. Last week, Jan Hatzius and Dominic Wilson, two Goldman Sachs economists, predicted that France and Germany would soon fall into a “mild recession,” contributing to a slowdown in the United States, where they put the odds of a new recession at 40 percent.
In Congressional testimony last week, Ben S. Bernanke, the Federal Reserve chairman, was also downbeat. He said that the economy was “close to faltering” and that the Fed had lowered its own forecast, adding that the Fed is prepared to intervene as needed. He did not predict a recession, however.
Mr. Achuthan, on the other hand, says that the gross domestic product rate is likely to go negative by the first quarter of 2012, if not sooner.
ASSOCIATED PRESS: Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.
The number of U.S. homes that received an initial default notice — the first step in the foreclosure process — jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.
The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.
“This is really the first time we’ve seen a significant increase in the number of new foreclosure actions,” said Rick Sharga, a senior vice president at RealtyTrac. “It’s still possible this is a blip, but I think it’s much more likely we’re seeing the beginning of a trend here.”
ASSOCIATED PRESS: Consumers paid more for a range of goods and services last month, pushing up inflation and squeezing Americans’ purchasing power.
The Consumer Price Index rose 0.4 percent in August after jumping 0.5 percent in July. The core index, which excludes volatile food and energy prices, rose 0.2 percent.
For the 12 months that ended in August, the core index surged 2 percent, the biggest year-over-year increase in nearly three years. That’s at the high end of the Federal Reserve’s informal inflation target. It could limit the central bank’s ability to take further steps to try to revive the economy.
The Labor Department said food prices rose 0.5 percent, the biggest increase since March. That was due to higher prices for cereals and dairy products. Energy prices increased 1.2 percent.
Among the factors driving up the core index were rental costs. They rose 0.4 percent, the most in nearly three years. Many Americans have been renting rather than buying homes, pushing up rents.
In other words, what’s coming is much worse than what we’ve seen so far. Strap on your helmet.
REAL CLEAR POLITICS: Jim Cramer, CNBC host: “Now let’s talk about the fact that you said the economy is weak. You put out a jobs plan. The New York Times today basically gives its obituary. ‘Tax plan for jobs bill.’ Familiar ring. Meaning the GOP will not back this. Is this dead on arrival?”
Tim Geithner, U.S. Secretary of Treasury: “Absolutely not. I think that there’s no reason now for the Congress of the United States not to act to help strengthen growth in the near term. It’s the conservative, prudent, responsible thing to do. You can think of it as protection against Europe.”
Geithner: “You can think of it as insurance against weaker growth going forward. And you got to think about the alternatives. If Congress or Washington is incapable of acting, then policy will be damaging to growth because what you’ll have is a deeper, steeper contraction in fiscal support than is prudent for an economy at this early stage of the crisis given the shocks we face. You know, life is about choices. Life is about alternatives.”
Mr. Geithner said we have “some ways to go” to heal the country from the crisis that we are in.
“You have to keep at it. You say that we are going to continue to do whatever we think will help get more people back to work, make the economy strong in the short term. Until we get definitively through this. And our basic strategy is to make sure we are healing the damage caused by this crisis and we have some ways to go as you know despite the improvement of the financial sector. And we want to make sure at the same time we’re making this a better place to invest, make exports stronger and strengthen our long-term fundamentals,” Geithner said.
LARRY KUDLOW: No sooner had President Obama shocked the political world with a gloomy economic forecast – projecting 9.1 percent unemployment for this year and a reelection-killing 9 percent for 2012 – than the dismal August jobs report arrived showing no gain in nonfarm payrolls. That’s right, no gain at all. Private jobs increased a scant 17,000, while hours worked and wages actually declined. Obama’s economic policies have failed.
Are we on the front end of yet another recession? This report alone suggests that we could be, although other data points disagree. But on the eve of President Obama’s so-called jobs speech, there’s a much bigger question here: Has the U.S. entered into long-term economic decline?
Why, under Obama, are initial economic reports ALWAYS revised downward later?
1% GDP growth doesn’t even keep pace with U.S. population growth, which means America’s standard of living will continue to plummet. This is Obamaville.
CNBC: The U.S. economy grew much slower than previously thought in the second quarter as business inventories and exports were less robust, a government report showed on Friday, although consumer spending was revised up.
Gross domestic product growth rose at annual rate of 1.0 percent the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. It also said after-tax corporate profits rose at the fastest pace in a year.
Economists had expected output growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent. The government’s second GDP estimate for the quarter confirmed growth almost stalled in the first six months of this year.
RICHARD POSNER- THE NEW REPUBLIC: If the notion that we are merely living through the aftereffects of a mere “recession” that ended in 2009 sounds somewhat ridiculous, that’s because it is. If we were being honest with ourselves, we would call this a depression. That would certainly better convey both the severity of our problems, and the fact that those problems have no evident solutions.
The American economy currently has both a short-term problem and a long-term problem. The short-term problem is that the economy is depressed; it is growing more slowly than the population, with the result that per capita income is declining. The high rate of un- and underemployment is a factor, but is itself the product of other factors, having mainly to do with the reluctance of over-indebted consumers (over-indebted in major part because of loss of equity in their houses, the major source of household wealth) to spend, the reluctance of the impaired banking industry to make risky loans, and the reluctance of businesses to invest and to hire, which is due in part to weak consumer spending and in part to profound uncertainty about the nation’s economic future.