We hear it from one enthusiastic economist after another: The cheery news that a U.S. economic recovery is well under way. And they're quick to offer a slew of statistics to document their vision of a perkier economy, ranging from climbing figures on retail sales to rising numbers on the leading economic indicators.
Clearly, a growing contingency of bullish investors is swallowing this optimism, evident from a galloping stock market, what with the Dow shooting up nearly 20 percent since late August despite a lingering bevy of worries out there.
The sentiment -- reflecting a rosier market, largely predicated on an economic rebound, and the highest level of consumer confidence in 18 months -- could hardly be more buoyant, notes one recovery skeptic, Florida investment newsletter writer, James Dale Davidson, editor of Strategic Investment. His contention is that the recovery talk is all very questionable, arguing that those believe it are walking on thin water.
Taking potshots at some comments from one well known newsletter writer, Louis Navellier -- namely that the U.S. economic engine is really starting to pick up some steam and will lead the world recovery in 2011" -- Davidson observes "he may be mistaking fog for steam."
As he sees it anticipation of a sustainable recovery, much less the U.S. leading a global recovery, is fantasy. Or in the true sense of the word, he says, "it magnifies fishy, fabricated statistics with a large lens of wishful thinking."
The consensus view expecting such a recovery, notes Davidson, ignores the fact that most consumers are stranded without income growth and liquidity. It should also be kept in mind, he points out, that all U.S. employment growth since June 2009, the supposed end of the downturn, has been in part-time positions that pay an average of $20,000 a year.
The only good thing about these low-paying jobs is that they're paying jobs. But the people who are taking them, observes Davidson, are most likely living off unemployment benefits, or no income whatsoever. Meanwhile, the bad thing about these jobs is they won't be enough to grow the economy in a way that any average person could feel. In other words, if growth comes it will be slow.
Addressing the issue of how to get a growing economy without income growth, Davidson wasn't very enthusiastic. The latest gimmick, he says, is a payroll tax holiday, with Wall Street analysts all agog over the impact of temporary lower payroll taxes in fueling consumer spending this year. Our skeptic, though, is quick to say he wouldn't hold his breath. "The lathered up enthusiasm on the effects of a minor tweak in the payroll taxes is incredible," he says. "All the bulk of the recently enacted tax cuts does is merely extend the status quo." What's more, he points out, most of the payroll tax "stimulus" will disappear into gas tanks at $90 a barrel as oil prices take their toll on the heartland. Speaking of energy, he also takes note of research that indicates every penny at the gas pump drains $1.5 billion out of household cash flow.
What about the benefits of the Federal Reserve's $600 billion economic booster QE2 (quantitative easing)? Here again, Davidson is hardly enthralled, noting "the result to be expected from this QE2 policy of inflation is a renewed recession in the U.S. as higher energy costs absorb liquidity." Bernanke, he says, has hastened the day oy of reckoning.
Davidson's bleak assessment aside, there are a lot more happenings that raise serious questions about the validity of the economic recovery. Some noteworthy examples:
--An inventory of 6.2 million vacant homes (including the shadow inventory of foreclosures on bank books) that have not yet have been put on the market.
--The inability of nearly 26 million job-seeking Americans to find some work.
--The inevitability of substantial layoffs by state and local governments due to their mounting financial woes.
--Some 42 million people on food stamps and counting.
--About 78 million baby boomers entering retirement who are more likely to be savers, not spenders.
--A rising national population of beggars, a number of whom are said to have taken to the streets at night despite bitter temperatures.
Davidson didn't say it in so many words in challenging the general view that an economic recovery has been launched, but his message seems clear: Christmas is over, Santa is gone and he's not about to return any time soon.
What do you think? E-mail me at Dandordan@aol.com