PeakTrader.com

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PeakTrader said...

Here's one view:

What is the U.S. Employment Picture in Really Saying?
Mar 31, 2011

The mystery behind the lingering unemployment levels can be explained by the fact that the recession is still ongoing. It has now surpassed the duration of the longest recession seen during the Great Depression.

The combined effects of soaring commodity prices, turmoil in the Middle East, lingering high unemployment in the U.S. with no efforts by Washington to address the issue, a real estate market in the U.S. that continues to weaken, continued problems in Europe, and the catastrophic events in Japan – have added to already worrisome levels of global economic and financial risk.

The lack of real job growth, combined with the absence of real wage hikes confirms that there will be no double dip recession, as the recession which began in December 2007 has not yet ended.

America’s Second Great Depression will persist for years to come, and will be made worse if Washington continues to ignore the fundamental economic problems of unfair trade, the broken healthcare system and pension deficits.

Dr Doom on rising commodity prices:

NOURIEL ROUBINI: Mideast crises raise risk of double-dip recession
2011/03/30

The latest increases in oil prices — and the related increases in other commodity prices, especially food — imply several unfortunate consequences.

First, inflationary pressure will grow in already overheating emerging market economies, where oil and food prices represent up to two-thirds of the consumption basket. Given weak demand in slow-growing advanced economies, rising commodity prices may lead only to a small first-round effect on headline inflation, with little second-round influence on core inflation. But advanced countries will not emerge unscathed.

Indeed, the second risk posed by higher oil prices — a terms-of-trade and disposable income shock to all energy and commodity importers — will hit advanced economies especially hard, as they have barely emerged from recession and are still experiencing an anaemic recovery.

The third risk is that rising oil prices reduce investor confidence and increase risk aversion, leading to stock-market corrections that have negative wealth effects on consumption and capital spending. Business and consumer confidence are also likely to take a hit, further undermining demand.

If oil prices rise much further — towards the peaks of 2008 — the advanced economies will slow sharply; many might even slip back into recession. And, even if prices remain at current levels for most of the year, global growth will slow and inflation will rise.

PeakTrader said...

At best, this slow U-shaped economic recovery will continue, with the country closing the output gap and reaching full employment in four or five years, unless there's a heavy dose of Reaganomics:

1. Cut government spending.
2. Cut taxes.
3. Deregulate (e.g. energy, health care, and education).

We need two or three years of strong real growth similar to 1934-36 [although, there was a double-dip in 1937-38]:

Heading for a double dip
Robert Reich
March 31, 2011

Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.

Wikipedia:

In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.

The American economy then took a sharp downturn, lasting for 13 months through most of 1938.

Industrial production fell almost 30 per cent within a few months and production of durable goods fell even faster. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938...Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.