For the first time since the industrial revolution, the U.S. faces two significant growth issues: 1) a declining labor force; and 2) a job skills mismatch. The declining labor force is demographic in nature and is occurring in every industrial economy; likely a function of the long-term success of capitalism. The skills mismatch is a function of technological change that is so rapid that the skills of the existing labor …Read More
Economic Growth: Its Importance and the Potential Impact of its Demise
Conceptually, economic growth is a function of two factors: the growth of jobs, and the productivity of those employed. In a world where the labor force of industrialized nations is stagnating, or, worse, shrinking, one might reasonably ask: “Why is economic growth, as measured by the increase in real GDP, so important to the economy?” A good argument can be made that real GDP per capita would be a better …Read More
“Normal,” It’s Not What You Think!
Most readers remember the pre-recession days of 4% GDP growth, interest rates at levels where savers had return choices worth pursuing (e.g., the 10 year T-Note at 4%), and workers could count on annual real wage growth. Today, many refer to this as “normal,” and there is a desire, if not a movement, to return the economy back to such a state. You can see this in the political arena. …Read More
At Recession’s Onset, There is No Bell, Bugle, or National Anthem
From my reading of the business media, there are few business economists who believe, like I do, that the probability of a recession in the next 12 months is greater than 50%. A recession is generally viewed as two consecutive quarters of negative real GDP growth. Looking forward, a recession isn’t inevitable, as there have been ‘soft landings’ in the post-World War II era. Nevertheless, from my lens, there doesn’t …Read More
The Risk of Recession is Rising; So is Market Risk
Recession: This is the hardest world for any business economist to pen, especially when the equity market is on a tear. Nevertheless, that is the reality of a slow growth, deflationary world where not much negative must happen to push the 1% growth economy into negative territory. Post-election, markets initially rose on the hopes of economic stimulus from the Trump administration. Then, they flattened as prospects for rapid policy changes …Read More
Hope is Not a Good Investment Strategy
According to the Bespoke Investment Group, every year, Wall Street analysts declare that the stock market will rise, and since 2000, the annual average forecast has been for a 9.5% gain. The reality is that the market has only risen at a 3.9% rate over this time frame. The 2008 forecast was for a market increase of 11%; the reality was -38%. To say that Wall Street promotes the stock …Read More
