Thursday, October 18, 2012

Slowdown to Recession or Just Slow?

The drop in unemployment to 7.8 percent relieved the White House that October’s figures would reinforce the lack of progress in the recovery.

Other good news is a slight uptick in housing prices and sales and, of course, the booming stock market of 13610 (DOW), up 11 percent this year and approaching the 2007 all-time high of 14164.

But, there are numerous signs of a slowdown next year, even a recession.
  • Europe, our top trading partner, is in a recession.  It is producing a drag on American business earnings and private sector jobs.  China’s slowdown, while still mild, will exasperate the trade fall off.
  • There will be continuing public sector cuts, especially as expected 2013 federal cuts are implemented.
  • The fiscal cliff and uncertainty in changes in fiscal policy, including both possible massive spending cuts and increases in taxes, hurt both public and private investment decisions (U.S. growth next year only 2.2% GDP).
A deeper slowdown next year is a dangerous circumstance if the public associates it with fiscal mismanagement in Washington.  Then a real voter revolt might be in order in 2014.

Denver Post:  IMF offers bleak assessment of stalled recovery
Wall Street Journal:  Global recession risk rises

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