The rest of this series can be found here.
Overblown, You Say?
Some of the facts which lead me to believe that fears of a double dip recession are overblown:
– Quarterly GDP growth rates moderated after the recessions in 1990 and 2001, too.
– There is only one historical precedent for a double dip recession in the modern U.S. economy, back in 1980, and that one is somewhat debatable. The National Bureau of Economic Research actually considers it to have been two separate recessions.
– In Q2, ‘employee hours worked’ grew at a faster rate than at any point in the previous ten years. Next step? Hiring, because people can only work so hard until new help must be hired.
– Assuming some gain in productivity in that last bullet, GDP growth in Q2 may prove to be better than in Q1.
– In Q2, monthly gains in private sector employment averaged 119,000, up from 79,000 in Q1. Yes, the June number was a bit unimpressive, but it was nonetheless positive – and any analysis based on just a one month snapshot is, well, bad analysis.
– The Institute for Supply Management indices, though down slightly, are still indicating the economy is in expansion mode. Anything above 50% is considered good. We were at 56.2% in June.
– The U.S. Treasury yield curve continues to be steep.
– World trade is now back to pre-Great Recession levels.
– Credit markets bounced right back from that whole Greece scare.
– Consumer confidence, though down for what I believe are explanatory reasons (it’s the oil spill, stupid!) will likely increase considerably if it does nothing more than revert to the mean.
– GDP growth looks like this. If you did nothing but look at the three bars at right, you’d intuitively grasp that the probability of a double dip is quite low. We’re doing okay, all things considered.
Because of the above, I also think it’s safe to say that the odds of being spectacularly wrong about the course of the economy over the next twelve months are much higher right now on the double-dip side of the debate. I don’t consider myself a permanent bear or a bull, mind you, but it’s seems considerably more likely the bears are wrong here. So, label me what you may.
To be clear, it’s also relatively easy to come up with a list of things to be concerned about in the economy these days. Some are significant, and all are worth keeping an eye on. In a nutshell, though, I believe that list is shorter and less relevant than the one above.