U.S. Economy Is Expanding, Not Receding 7 comments
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Friday’s job report (May 2nd) was another indication that the US economy is not about to roll over, as widely predicted. The report came in stronger than the consensus expected with non-farm payrolls declining only 20K in April from an expected loss of 75K, while revisions to February and March subtracted 8K.
This is consistent with sluggish growth for the first half of fiscal ‘08, but not recession. If this were a true recession, the kind that feeds upon itself, job losses would be much more severe and corporate profits would not be nearly as good. As a result, the Unemployment Rate dropped to almost 4.9 percent from 5.1 percent, with Manufacturing Payrolls also reflecting an improvement as it rose to -46K from -48K.
Despite a loss of payroll jobs in the past three months, it is likely that real GDP grew at about 2% annual rate in the first quarter. GDP growth for the fourth quarter of 2007 was also up slightly, while the prior two quarters averaged over 4 percent growth. Worth pointing out is that while real GDP slowed to just 0.6% in the first quarter, the number is expected to be revised up, and an economic rebound to more than 3% growth - in the second half of fiscal ‘08 is highly probable.
Furthermore, consumer spending has been up steadily through the first quarter. Exports are booming with the Factory Orders index adding to the improved outlook and surging to 1.4% from a negative 0.9%. Business investment in equipment and software continue holding up very well. And at 154 million employed, the civilian labor force just hit a new all-time high.
Not bad I’d say for a US economy which constantly finds itself in the midst of a fear mongering campaign from the vast armies of journalists and economists who never fail to sensationalize economic problems. Yet, the economy manages to expand and show off signs of resilience.
Only few weeks ago we were headed for our first-blown horrible recession in 16 years, according to predictions made by the economist elite at Merrill Lynch and Morgan Stanley. This notion was also reinforced only a couple of days ago by Warren Buffett in a CNBC interview.
This is unfortunate. Media hysteria over the mortgage crisis and continued collapse in homebuilding has certainly misled countless people about prospects for the real economy. We still grew at 0.6%. This naturally leads one to ask the contrarian question: Since when have the media and the Buffetts of the world ever had our best interest at heart and given us an advance warning of an impending economic crisis that actually came to pass? Exactly.
Napoleon Bonaparte cynically once said “Men are moved by two levers only: fear and self interest.” You would agree with me that Wall Street has become master of both elements. Fear sells. It sells newsletters, it sells bookings and most importantly shakes the weak hands.
Is it ethical? Definitely not. Will the tactic ever change? Probably never. But what can change is our rejection of media-propagated myths and clichés along with Wall Street’s misleading and unfounded analytical arguments thrown our way. It simply shouldn’t be tolerated.
Bottom line: First quarter real GDP was up. Bonds are yielding much more than short-term bills with the stock market well along its route to recovery. Increases in consumer spending and exports will keep GDP growth positive in the second quarter. The fiscal stimulus will see to that. Just yesterday, the April ISM Services Index, a national nonmanufacturing survey, rose to 52.0, from 49.6 - reflecting expansion. This was higher than the expected reading of 49.1.
There will not be a single down quarter for GDP in ‘08. This is not a recession.
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This article has 7 comments:
read the superb articles by michael shedlock or the analysis presented by john mauldin. These really add alpha!
This article here is just another one for the growing waste paper basket at SA.
Clearly we are heading into a recession -- the only question is how long and big it will be...
I wish there is a way to flag this author's article out -- totally misleading!!!!
The problem is if and more likely when the $516 trillion OTC derivatives bubble bursts, the economy willy be in trouble. In order to save what economy we have to
TakeBackTheFed.com
and create a new financial system that serves the economy rather than vice versa.
And those of you claiming that the employment rate is climbing are out of your heads. How can employment be rising when thousands each week are being laid off? just the past 2 months saw 3 major airlines go out of business, placing thousands out of work there, major retailers are now beginning to file for bankruptcy placing even more out of work. retail is supposed to be or saving grace as it employs thousands more workers than manufacturing(which is nearly no existent in America any more) .
You all read those unemployment numbers and think its great, less unemployed this week, when in fact there are those who have run out of claims(exhausted their benefits) so they are no longer included in the unemployed even though they still don't have jobs.
Let the government continue to miss lead you into a false sense of America is just fine. Look at Asia(particularly the Philippines) they depend on our strong dollar and our accepting their exports. Our weak dollar is even tearing their economy down,as we don't import have what we did last year and our weak dollar translates to a decreased spending power for them.
With all the extra cash floating around(excess printing of fiat currency) will keep our dollar weak and continue to feed the soaring commodity prices which will keep our economy from recovering.
And the stimulus checks , half are already spent with no signs of real improvement in the economy, so you think the small amount that is yet to be spent will life us out of this stagflation we are in? dream on .
Only when our government first quits lying to us about the present condition (never gonna happen) and when they quit printing all this cash,will we have any chance of a meaningful recovery.Until then, your job just may be at risk as companies one by one file for banckruptcy.
As far as Disney and a few other companies who normally would be expected to be slow in a recession, that can be explained when you look at the fact that our weak dollar makes things here look cheap to foreigners(so they are coming here to vacation ) in record numbers.So certain areas which might normally be slow have had a slight boost because of the weak dollar , but don't place too much stock in their lofty numbers, as it isn't about to propel us out of recession just because a couple little areas are doing well right now.