Daily commentary: Does the US recovery have legs?

This daily commentary is a bronze-level post. A lot of the data coming through in recent weeks shows the US recovery will continue for a bit. I caught two or three data points in the links today about this so I wanted to flag it for the daily commentary.

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A lot of the data coming through in recent weeks shows the US recovery will continue for a bit. I caught two or three data points in the links today about this so I wanted to flag it for the daily commentary.

Here’s my take: the secular move up in debt cannot continue for households without income growth. That means that this particular cycle will be short unless the jobs numbers we are seeing now translate into income for consumers and a sustained recovery that causes the economy to add 400 or 500,000 jobs monthly. Joe Stiglitz had a good piece in the FT that is in the links. He says:

Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018.

So you see why these numbers really aren’t working yet.

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In the meantime, small businesses are finally perking up and sentiment is now marginally higher than the record lows plus consumers are spending according to the retail sales numbers. Gold members have seen my take there: retail sales numbers confirm household debt is fuelling US growth.

All of this tells me the recovery will continue through 2012, although it may start to fade in the second half. I am still thinking recession for 2013 as I predicted in October of 2009. So far, policy makers have done a bang up job keeping this thing afloat.

Here are the links.

  • Zu hohes Haushaltsdefizit: EU belegt Ungarn mit Sanktionen – Wirtschaft – FAZ

    Die Europäische Union belegt Ungarn wegen seines anhaltend hohen Haushaltsdefizits mit Sanktionen. Die EU-Finanzminister beschlossen am Dienstag in Brüssel, Zahlungen aus EU-Entwicklungstöpfen in Höhe von 495 Millionen Euro zu sperren, die das osteuropäische Land 2013 erhalten sollte.

  • The US labour market is still a shambles – FT.com

    Let’s assume that job creation continues at the rate of 225,000 jobs a month. That is only about 100,000 beyond the number required to provide jobs for the average monthly number of new entrants into the labour force. At that pace, it would take 150 months to reach full employment – 13 years, some time around 2025. The independent Congressional Budget Office is more optimistic, forecasting the return of full employment by 2018.

  • Retail Sales Perk Up, Adding Juice To Overall Economy – MarketBeat – WSJ

    Retail sales in February jumped at the fastest pace in five months, spurred by higher spend at auto dealers, gas stations and clothing stores. Retail sales advanced 1.1% from a month earlier, in line with economists’ forecasts. Sales are also up 6.5% from a year ago.

  • Historically Low Business Confidence Begins to Edge Up, Ever so Slightly: Main Street Still Cautious About the Future | NFIB

    The Small-Business Optimism Index gained 0.4 points in February to 94.3 marking the sixth consecutive month of gains. While still historically low, the latest increase is a sign that the recovery is likely to continue, albeit at a glacial pace. The Index is lower than that of February 2011 but is the second highest reading since December 2007, the beginning of the recession.

  • How To Make Your Shoes Last Longer – The Consumerist
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    "On top of the direct impact of further policy tightening, an unscheduled supplementary budget would also create additional uncertainty for households and businesses as they reconsider investment, spending and hiring choices in the face of a different fiscal and economic outlook," the economists point out. They caution: "At a time when the recovery is also facing a materially weaker external demand outlook, this could trigger a much more negative dynamic for the overall economy". They say that could in turn intensify a downward spiral if a further negative impact on the real economy filtered into the public finances and the banking sector.

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