Three Cheers for 'Reganomics'
I was a guest for the full hour on CNBC's The Call this morning, a show hosted by Trish Regan. When introducing one of the segments, Regan actually hedged on whether the economy is in recession. That's right, she actually had the temerity to suggest that maybe, just maybe, the economy still has a smidgen of growth rattling around in it. That sort of mildly contrarian economic take is heresy on Wall Street these days, where recession is thought to be a done deal.
Well, good for her. Such optimism is not only a welcome change but one rooted in the economic data. Consider the following:
1) Although the economy has begun to shed jobs—80,000 in March, 76,000 in February—the losses so far have been much less than the 300,000 to 400,000 typically seen in a recession.
2) Weekly jobless claims are up as well, but the 375,000 level is below typical recession levels of 500,000 to 600,000, as Jim Glassman of JPMorgan Chase notes.
3) The Conference Board's Coincident Economic Indicators (industrial production, real business sales, payroll employment, and real personal income less transfer payments) rose 0.1 percent in March, a rate consistent, says economist Ed Yardeni, with real gross domestic product growth of 2 percent.
4) Macroeconomic Advisers, whose economic model is much respected on Wall Street, still has this quarter as slightly positive.
My take: Look, the economy has slowed sharply and may well be contracting a bit. But it hardly seems to be falling off a cliff. Even better, there are signs—like rising treasury yields—hinting at an easing of the credit crunch. And there is still plenty of monetary easing moving through the economic pipeline. Heck, the pervasive pessimism on Wall Street is itself a positive contrarian sign going forward.
Tools: 
Share
|
| Comments (2)
Reader Comments
don't think so
unemployment is rising
consumers are spending less because they have less disposable income due to necessitiy costs rising sharply
less consumption, not because of exports
Add your thoughts
Your comment will be posted immediately, unless it is spam or contains profanity. For more information, please see our comment guidelines.advertisement
The reason it "feels" like a recession is because exports are up. A recession is a contraction of GDP which means we are producing fewer goods and services which in turn means we are consuming less. In the current environment, unemployment is staying low and GDP growth is positive because we are going to work and producing more goods for export. But because we are exporting more our consumption is less. Less consumption gives the "feel" of a recession.
Apr 23, 2008 12:11:24 PM [permalink] [report comment]