The Economic Cycle Research Institute has made a bold prediction: there will be actual jobs growth in the service sector by the end of the year. Here's what they say:
"The rise in WLI [weekly leading indictors] growth to a record high reinforces our earlier forecast that at least the early stage of the current economic recovery will be more vigorous than the last two," said ECRI Managing Director Lakshman Achuthan.
....
"We expect non-manufacturing employment -- which is where 91 percent of us work -- to be positive by year end," Achuthan said.
"We are talking about recovery that includes jobs growth in the non-manufacturing sector, and we are talking about a recovery that includes increases in consumer spending.
I include this item not just for its contrarian boldness, but also because:
1. ECRI does not sell stocks or bonds. It is only a forecasting service, and has no conflict of interest.
2. ECRI was around during the Great Depression, and its forecasting model includes data from that era.
3. ECRI has been pounding the table bullish on the economy since March, calling for the recession to end by the end of summer, while almost all other pundits were predicting continued free fall at best. Now, most economists do agree that in GDP terms, the recession did indeed probably end this summer.
3 comments:
Please explain what growing industries are going to be hiring enough people to diminish unemployment. With consumers hunkered down and buried under debt, just what kind of boom in production do you anticipate?
Many of the leading indicators are fluff. Stock price increases, yield spreads, money supply growth and other “derivatives” of the real economy have no boots on the ground. Real wages are falling, use of credit is falling and demand is artificially boosted with government giveaways. Track auto sales after the clunkers boost. Watch home sales when the homebuyers boost fades. Fully 3% of GDP increase in the second quarter was from increased government spending. Add another percent for the hocus pocus of falling imports. Yes, the GDP for the third quarter will be positive but look at the underlying numbers. Back out the temporary stimulus of government and see what’s left. Back to school sales were off by 2.9% and they are a harbinger of Christmas sales. Hiring for the fourth quarter is projected to be down.
Going forward the Government is using bandages and plasma to keep the economy from cratering. There is no underlying strength. Personal consumption expenditures are down about 10% from their highs. There is nothing to reinflate them. Production is up from its trough but that’s just a bounce to stabilize at a lower level. The only real bright spot is exports. The rest of the World does not have two Wars, an enormous military boondoggle and a corrupt financial system to feed. They’re going to recover; it’s too bad about us.
New Deal -
ECRI is a bit vague on its beginnings, but it does not date back to the Depression.
ECRI does claim to have data for its indicators back to the Depression years. Economic data was sketchy in those days compared to today, so I'm not sure about the validity of this claim. Their model is proprietary and the model output and their analysis of that output is for sale to subscribers, so it is hard to evaluate their claims.
I'll buck the consensus and acknowledge that ECRI is likely correct - there will be a more robust recovery than many think possible.
My "objection" to recovery is essentially moral - the actions of the Fed and Treasury have made a mockery of moral hazard. There has been no meaningful reform of the FIRE sector of the economy and the "too big to fail" banks are larger than ever. The next "Minsky moment" for the economy will come sooner and be more damaging as a result.
I recognize that economic recovery is good for the average citizen in the here and now. Rooting against recovery is disgraceful. But I fear recovery will validate the lack of reform and the long-term consequences will be worse for all of us.
I believe some of the cheerleaders for recovery are motivated by the thought that credit will redound to the Obama Administration. It may in fact, but little of that credit would be deserved. The measures that stabilized the system were largely taken by the Fed. The stimulus spending to date is small compared to the liquidity created by the Fed's bond and MBS buy-backs and lending operations.
I fear the consequences of recovery more than the great recession. And for a small business person, the great recession has been awful.
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