Slow, Arduous Recovery: Structural Problems Abound
2011; Volume: 30; Issue: 2 Linguagem: Inglês
ISSN
1930-126X
Autores Tópico(s)Economic Theory and Policy
ResumoPARTICIPANTS Conf Board = Conference Board, New York, New York; Global Insight = Global Insight, Eddystone, Pennsylvania; GSU - EFC = Georgia State University, Economic Forecasting Center, Atlanta, Georgia; Moody's Economy = Moody's Economy.com, Westchester, Pennsylvania; Mortgage = Mortgage Bankers Association, Washington, D.C.; NAM = National Association of Manufacturers, Washington, D.C.; Northern Tr = Northern Trust Company; Chicago, Illinois; Perryman Gp = The Perryman Group, Waco, Texas; SP U.S. Bank= Minneapolis, MN; US Chamber = U.S. Chamber of Commerce, Washington, D.C.; Wells Fargo = Wells Fargo Bank, San Francisco, California. John Silvia, Chief Economist for Wells Fargo, captures the underlying theme in this quarter's Consensus Outlook in his timely work entitled: Three Hard Realties of an Economy out of Balance. Silvia states that the current situation facing the U.S. Economy is not cyclical in nature; instead, there are troubling structural issues including the continuing burdensome weight present in the housing sector, federal budget deficits that have been ignored, and inferior job skills available in the labor market. First, the housing sector with its excess supply of housing at over-inflated prices has essentially strangled the housing market. Temporary homebuyer credits and fiscal stimulus surely will not correct the present imbalance. Second, the federal budget deficit illustrates the growth of entitlements, which have begun to overwhelm any gains from economic growth. In the past, this situation was easily financed by our dependence on foreign inflows of credit. Perhaps, time has run out on that option. Third, the present situation in the labor market is highlighted by a stubbornly high unemployment rate. Job skills demands have risen faster than supply. Silvia points out some interesting labor market statistics based on education: In April 2011, those without a high school diploma had an unemployment rate of 14.6%, with a high school diploma, 9.7%, and a college degree, 4.5%. So, the bottom line would suggest the pressing need for out-of-the-box problem solving as opposed to just talking as usual by our country's lawmakers and guardians of economic stability. The Consensus Outlook calls for 2.3% year over year growth in real GDP. Again, relative to economic history and business cycle analysis this is inordinately below average and expectations. Keith Membre, Chief Economist for U.S. Bank (and a new member of the Consensus), calls for modest growth over the year in the 2% to 3% range driven in part by the Fed ending their QEP by June, and the market responding accordingly. Hembre's modest growth assessment is linked to an ongoing deleveraging process, demographic trends, and much more limited macroeconomic policy flexibility as we move forward. Hembre's publication, Economic and Financial Markets: Review and Outlook, Nuveen Asset Management May 2011, makes note of the usual cyclical pattern of a cooling off in summer in product and service production in conjunction with consumers retrenching due to the weight and expectations surrounding gas prices and other commodities. THE CONSUMER SECTOR Dr. Rajeev Dhawan, Director of the J. Mack Robinson College of Business Economic Forecasting Center, provides an insightful look at the economy especially as it relates to households. Dhawan believes the greatest impediment to continued economic growth is linked to current gas prices. Dhawan offers the following three-step analysis: 1) Due to escalating gas prices, consumers spend less on other discretionary items. Despite enjoying the 2 percentage point payroll tax cut that has put about $100 per month in the pocket of the average American, all of that has ended up in our gas tanks. As such, any additional expenditures are postponed or negated due to this loss and the fear of a general rise in prices across the board. 2) Businesses, especially those linked to transportation, increase prices and subsequently demand falls and the economy contracts. …
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