It appears that we're growing our way into a panic on the economy. It may be the first recession in history initiated by a 5% annual GDP growth rate. It won't be the first attempted by scare tactics in the run-up to an election. Full Story »
Posted by Kaizar Campwala
While I am intrigued by the question raised of whether we will worry ourselves into a recession, I can't trust this source as a balanced search for an answer, because of the way he cherry picks his data. Even the 5% GDP rate he cites is higher than the 3.1 % previously forcast by the Administration for 2008. His is a curiously timed post, assuring us at 8:28 a.m. that "The growth seen over the last two quarters gives every indication that the Bush-era expansion continues apace." The President's Council of Economic Advisors (CEA) was scheduled to release the administration's semi-annual economic forecast 2 1/2 hours later. And at 11:00 a.m. the Administration lowered its previous estimates to 2.7 %, because as CEA Chairman Ed Lazear briefed the press, "we found that our growth rate over the past few years was somewhat lower than we thought it was, so that affects our estimates of productivity as we go forward. And the second thing that we have is the housing market has been more pronounced -- the decline there has been more pronounced than we forecast at the time that we were doing our mid-session review, and that's built into the forecast for next year as well." Lazear also highlighted a slight increase in unemployment, attributing it to "the slowdown in the housing market, and the slowdown in the economy that is going to result from that."
How about the Federal Reserve? Of course the Federal Reserve previous predictions were even lower, although when asked, Lazear said “it would be virtually impossible to figure out which one factor is causing one number to be higher in one year than another.”
The author also failed to look at the Federal Reserve’s “Beige Book” which had been released the day previous to his post. “Reports from the twelve Federal Reserve Districts suggest that the national economy continued to expand during the survey period of October through mid-November but at a reduced pace compared with the previous survey period.” The drag resulted “relatively soft retail spending,” “significant” upward presure on prices of goods dependent on food and energy imputs and on a residential housing market that was “quite depressed.”
If he differs with this, present the opposing evidence.
And how about Goldman Sach’s recession predictions or the even worse ones from Merrill Lynch. These are hardly “media hysterics” the author derides. Merrill Lynch North American Economist, David Rosenberg is responsible for formulating and communicating North America economic, interest-rate and earnings outlook to clients. In August he warned, “.”There are plenty of signs now suggesting that we may be in the early stages of a consumer-led recession for the first time in 17 years," As reported today, in About 90 per cent of US companies have now reported earnings, and the news is bad, according to Merrill Lynch. The securities firm calculates that third-quarter operating earnings per share have declined by an average 8.5 per cent compared with the year-earlier period, the poorest performance since the final quarter of 2001.
Then yesterday Bloomberg columnist Mark Gilbert cited Rosenberg as writing in a financial note, we are becoming more certain that the recession is either here or no more than two quarters away.
Today, Rosenberg is cited by David Berman of the Financial Post as predicting “odds of a recession are now 60, up from a recent Estimate of 50, using a Proprietary model that takes into Account the yield curve.”
There’s also the “Disposition of personal income” indicator, which shows less surplus income and drastically decreased savings. There’s the “Middle Class Security Indes” that shows 69% lack either the educatioin, savings, assets, etc. to be economically secure.
And Clive Crook, writing in the conservative National Review in his “wealth of Nations” column for 11/30 write, “If housing-market distress mounts over the next few months, as seems certain, and if America’s astoundingly resilient consumers finally surrender to their debts and declare a recession, the context for the election will shift abruptly. Positions on monetary and fiscal policy will have to be developed. And arcane financial issues that the parties and the presidential candidates have given little thought to so far may, by popular demand, come to the fore. Better, simpler, and more comprehensive regulation of mortgage and other lenders, new rules on personal bankruptcy (making it easier for mortgage defaulters to stay in their homes), and a hard look at Fannie Mae and Freddie Mac are all candidates for enhanced political standing.”
I could go on and on.