Rosenberg: “If I was going to publish a bullish report on the U.S. economy…”

Everybody’s favourite bearish analyst, Gluskin Sheff’s David Rosenberg had a few thoughts on some of the bullish analyses he’s been seeing. Despite his bearishness, he even goes as far as to say why he would be bullish.

Here are the first relevant few paragraphs from his morning note:

Somebody sent us a piece of research late last week that apparently calls into question everything from the deleveraging cycle, to the ongoing crisis in real estate, to double dip risks, to deflation. This was yet another in a long list of published reports laying claim that private sector employment is actually running at a faster rate now than it was coming out of the 2001 recession. As if. Pretty heady stuff, nonetheless (we spent at least an hour shaking our heads; that much is for sure).

Again, I’ve been asked to respond. Look, we know that the Fed just cut its macro forecast twice in two months, Obama felt the need to announce yet another fiscal stimulus package, and the latest Fed Beige Book was pretty well the softest it has been in nearly a year. The macro backdrop could not possibly be more clouded.

It is also worth questioning the frequent use of mindless cycle-on-cycle charts that try — shamelessly in my opinion — to convince people that the U.S. labour market isn’t in that bad of shape with nearly 15 million unemployed and another 11 million underemployed. As a share of the workforce, these are levels last seen in the 1930s. Never in the post-WWII era have we seen almost half the unemployed ranks out of work for over six months. That share in the past didn’t go above 30%, even in the worst downturns. Relying on “headline” payrolls (not even taking hours or total labour input into account) and the 2001 tech wreck as the prime example, a “recession” that contained not one quarter of decline in consumer spending and no home price deflation at all, is not what I’d call very useful. I’m not even sure what it’s telling us. If it’s saying that we are enjoying a better bounce off the “recession” lows compared to 2001, then it’s only really a debate as to when did that downturn “really” end and if in fact the most recent recession has fully terminated.

I have to agree with Rosenberg that employment is the last thing you would want to use to make a bullish case. It may not be screaming double dip. Nevertheless, the Hussman piece I reviewed points to employment as still being one of the weaker links in the data series chain. We hope employment turns up – and growth with it. But, this is more hope than reality at this point given what small businesses are saying. In any event, Rosenberg does go on to say what could be a bullish macro analysis for the coming cycle. He writes:

If I was going to publish a bullish report on the U.S. economy, it certainly wouldn’t be based on consumption, employment or housing. It would be based on innovation, patents, and the likelihood that the U.S. is embarking on a manufacturing renaissance of sorts — partly reflecting the new permanently higher level of energy prices, which has negatively affected globalization, years of U.S. dollar depreciation, which has helped act as a protective tariff for local producers as well as a major competitive boost.

He almost sounds like a green energy enthusiast here. Good stuff from Rosenberg. A lot more on corporate bonds, Canada and small business at the first link above (registration required).

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