For what it's worth, here's one forecast from 2011q2 to 2013q1, by the estimable Mark Zandi and the Moody's Economy.com team. Like most forecasts right now, it shows slow improvements in GDP, jobs, and unemployment, though the latter glides down slowly to about 8% at the end of the forecast.
Zandi writes:
While hard to see in the current gloom, the economy's fundamentals are improving. Corporate profitability and balance sheets are very strong: The question is not whether businesses can increase investment and hiring, but their willingness to do so. Household debt burdens are easing and credit quality is rapidly improving; delinquency rates among loans other than first mortgages are back to prerecession levels. The financial system has also been recapitalized and is generating significant profits again.
Most forecasts expect this type of pattern because once the "corrections" (e.g., high debt levels) or headwinds (e.g., high gas prices) dissipate, the models assume the natural growth cycle takes over. Investors respond to low interest rates, there's more economic activity (consuming, building, investing), job growth picks up, and you're off and running into an expansion.
And, in fact, this forecast has employers generating around 300,000 jobs per month by 2013, a decent pace that would put faster downward pressure on the jobless rate, so that's the number to watch.
The problem is that so far, the expansion has been jammed by all the factors mentioned here. I don't mean to be gloomy, and I hope Mark and company are right (and even their forecast is for only moderate growth -- more of an upward-leaning L than a V-shaped recovery). But it's just as likely that we'll have to move these three lines forward in time, i.e., we stay stuck in neutral for a few more quarters before these growth patterns kick in.
More to come on this.
This post originally appeared at Jared Bernstein's On The Economy blog.
The Fed prints $600 billion into the global financial system. It heads straight for commodities, driving up prices globally for energy and food, feeding directly into the Arab Spring and a major spike in domestic gas and food prices, creating one the very "headwinds" under discussion. Then there is the Japanese earthquake, or the European debt crisis, or the Chinese mega-bubble, or the disintegration of politics in the US (among others), or the ongoing insane wars against Islam now with Pakistan as the target, or....
We've created one colossal structure which no longer serves people, only the system itself, which our leaders now sacrifice anything and everything (meaning people) to maintain, guaranteeing what amounts to a permanent, escalating series of political/social/economic crises.
You can kiss the economics and models of the post-war period goodbye, along with all the longer-term projections that go with them. We may see what Zandi projects - or just about anything else.
See www.aesopinstitute.org for an overview of the problem and a few maps worth thousands of words.
If we mobilize to meet this peril, which can make many cities including NY, DC, BOSTON, etc. uninhabitable, the effort can revitalize the economy and generate millions of jobs.
http://richardheinberg.com/the-end-of-growth
"...will bring this money out of the safety of stocks and back into the working economy"
what I am asking specifically is (1) How are stocks 'safe' compared to the 'working economy', (2) What in the world is the 'working economy'?
Thank you
What I mean by "working economy" is what most of us live with. New, riskier businesses that you could make money on as well as lose. The "rich" are afraid of these investments for reasons like Obamacare, which is a tax that is unclear how much it cuts off the profit margin. This "working economy" is where jobs are created because there is actual work to be done to be a success. I hope this clears up what I mean,and if it doesn't I will try again.
I love to see these future forecast charts that show a 'dip' or abnormality, in an otherwise trending line, and this is forecast years into the future... i always wonder what information they have that will supposedly cause these abberrations - do the see a volcano erupting somewhere, or a change in consumer demand for some reason, or did they just put it in there to make the chart appear my 'realistic'?
What is interesting is to compare all these charts making future forecasts to what actually occurs... but we never see such a comparison because it would show how inept the chart makers are at forecasting and discredit any new charts they might produce.
Forecasts CAN be accurate if the period we are forecasting is in the not-too-distant future. Any respectable weather forecaster will tell you that a weather forecast past 5 days is a load of BS. But many "respectable" economists do not uphold the same realistic standards. They have the arrogance to give a forecast 1 or more years into the future!
And you're right, there is almost never a post-hoc validation of previously forecasted values. Although... I bet you there is a paper on Google Scholar that has done it and shows that economists forecasts are usually wrong.
ANd what's up with the reverse mortgages all of a sudden? they want old people's paid off houses now too?
They are willing to tank the economy if that is what it takes to defeat him.
To stay on subject, I read an article that says it takes 125,000 jobs/month to keep up with population growth. Barons published predictions that hiring would pickupo next year - 8.25% by election time. Still not very good.
In times of stress, people will home in on the best buys and discount wannabe and 'nice to have' products. As the recovery stretches out further and further into the future, this should put increasing downward pressure on the recovery. This is the way that capitalism 'cleans out it's attic' and chucks it's garbage.
Since the 1950's there has been this dream that these new technologies would bring about vast improvements in human lifestyle and leisure time. What we didn't factor in was how the average working humans were going to get the money to buy into this life style. We're at the decision point........what do we do with the excess humans who don't have the means or opportunity to own capital or participate in the capital markets in a meaningful way :-)
The Republican idea is to let capitalism prevail and let them simply fade away like a defunct corporation (no mention or description of the fading process). What's the progressive idea?