A lot of the data coming through in recent weeks shows the US recovery will continue for a bit. I caught two or three data points in the links today about this so I wanted to flag it for the daily commentary.
Here’s my take: the secular move up in debt cannot continue for households without income growth. That means that this particular cycle will be short unless the jobs numbers we are seeing now translate into income for consumers and a sustained recovery that causes the economy to add 400 or 500,000 jobs monthly. Joe Stiglitz had a good piece in the FT that is in the links. He says:
Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018.
So you see why these numbers really aren’t working yet.
In the meantime, small businesses are finally perking up and sentiment is now marginally higher than the record lows plus consumers are spending according to the retail sales numbers. Gold members have seen my take there: retail sales numbers confirm household debt is fuelling US growth.
All of this tells me the recovery will continue through 2012, although it may start to fade in the second half. I am still thinking recession for 2013 as I predicted in October of 2009. So far, policy makers have done a bang up job keeping this thing afloat.
Here are the links.
Die Europäische Union belegt Ungarn wegen seines anhaltend hohen Haushaltsdefizits mit Sanktionen. Die EU-Finanzminister beschlossen am Dienstag in Brüssel, Zahlungen aus EU-Entwicklungstöpfen in Höhe von 495 Millionen Euro zu sperren, die das osteuropäische Land 2013 erhalten sollte.
Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018.
Retail sales in February jumped at the fastest pace in five months, spurred by higher spend at auto dealers, gas stations and clothing stores. Retail sales advanced 1.1% from a month earlier, in line with economists’ forecasts. Sales are also up 6.5% from a year ago.
The Small-Business Optimism Index gained 0.4 points in February to 94.3 marking the sixth consecutive month of gains. While still historically low, the latest increase is a sign that the recovery is likely to continue, albeit at a glacial pace. The Index is lower than that of February 2011 but is the second highest reading since December 2007, the beginning of the recession.
Andrew Tyrie, chairman of the Treasury Select Committee, tonight called for Greece to exit the euro and for the resources of the International Monetary Fund (IMF) to be significantly boosted to tackle future financial crises.
We tend to think of anger as a wild, negative emotion, but research finds that anger also has its positive side.
The fear is that, as in Greece, cuts in public wages, rising unemployment and continued tax rises could spark a deep contraction that would make fiscal targets hard to meet. Portugal must cut its budget deficit to 4.5% of GDP this year from 9.8% in 2010.
The city, carrying a debt load of more than five times its general-fund budget, will miss $5.27 million in bond payments due March 15 on $51.5 million of bonds issued in 1997, according to a notice its receiver posted on the Electronic Municipal Market Access system, a database for filings by debt issuers.
"On top of the direct impact of further policy tightening, an unscheduled supplementary budget would also create additional uncertainty for households and businesses as they reconsider investment, spending and hiring choices in the face of a different fiscal and economic outlook," the economists point out. They caution: "At a time when the recovery is also facing a materially weaker external demand outlook, this could trigger a much more negative dynamic for the overall economy". They say that could in turn intensify a downward spiral if a further negative impact on the real economy filtered into the public finances and the banking sector.
Sare Holding SAB (SAREB), the builder offering $1.4 million condominiums on the Pacific coast beach of Acapulco, is struggling to sustain sales and share prices amid increasing bloodshed from Mexican drug cartels. Revenue in Acapulco, Sare’s one-time biggest market, dried up completely in the fourth quarter, dragging full-year home sales in the city down 54 percent to 330.2 million pesos ($26 million), according to a Feb. 27 report and additional figures provided by the company.
HALF of all loan applications by small and medium enterprises (SMEs) have been refused in the last three months, a new survey claims.
European countries are expected to implement tough austerity measures amid the debt crisis. But Germany isn’t setting a very good example. SPIEGEL has learned that Berlin failed to reach its own austerity goals in 2011. And despite pressuring its neighbors to save, Germany is behind this year too.
The Citizens United decision was so bad that the campaign finance reform movement has had to start talking about a constitutional amendment to eliminate corporate personhood — a process that could take decades — because there are so so few options for reform. So what do we do in the meantime?
In other words, if any of the big four banks are allowed to pay dividends or buy back stock this year, you should regard it as a bit of electioneering by the Fed. The banks have a long way to go before they are healthy, and the central bank knows even as it pretends not to know that for public relations purposes.