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Economy Must be Getting Better (It Can't Get Much Worse)

By    |   Wednesday, 08 Jun 2011 09:00 AM

Everyone can’t be right, and this is almost always true in investing and economics.

So when everyone agrees that something is going to happen, the opposite will usually happen. Right now, it is difficult to find an optimistic economist, meaning the future will probably be better than anyone expects it to be.

In the past week, former Fed Chairman Alan Greenspan announced that he is scared of the deficit and worried about the future of the economy. His forecasting ability has generally been less laudable than his ability to manage the economy. He famously predicted stocks were priced too high in 1996, and missed the beginnings of the home price bubble.

Higher gasoline prices recently added to the gloomy consumer outlook, but those prices are now more than 10 percent below their peak and continuing to fall.

Despite the negativity, many economic indicators are actually pointing toward slow growth. The data seem to be most consistent with a slowdown, but not necessarily a recession. It is likely we will see a slowing of the global economy, and in an increasingly connected world that no means no one will fully escape the impact.

High unemployment is a part of the New Normal described by analysts at investment giant Pimco, and this New Normal seems to be where we are.

Inflation, at least overall inflation, will be relatively low. Individual products like gasoline will see occasional spikes, but the slow growth will keep other prices in check.

Slow growth will allow central banks to keep interest rates low, and this is good news for housing and the stock market. Investments in these sectors may not shoot higher, but they are unlikely to crash from current levels.

With unemployment at 9.1 percent, employment stands at 90.9 percent and the number of planned layoffs has dropped dramatically in the past year.

It’s unlikely to get much worse, and while it’s also unlikely to get much better, the economy can trudge along like it is for quite a while.

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MichaelCarr
Everyone can t be right, and this is almost always true in investing and economics. So when everyone agrees that something is going to happen, the opposite will usually happen. Right now, it is difficult to find an optimistic economist, meaning the future will probably be...
michael,carr,us,economy,data,better,worse
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2011-00-08
Wednesday, 08 Jun 2011 09:00 AM
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