Employment data released in July showed that June marked the 9th consecutive month of job growth for the U.S. Over the past 18 months almost 1.8 million jobs have been added, yet total employment remains about 7.0 million below the January 2008 peak. From an employment perspective, the recovery has yet to gain traction.
Gary Shilling, economist and contributor to Forbes and other major business publications, has now indicated that a recession is on tap for 2012 On the other hand, the Conference Board feels the chances for a recession, based on the business cycle, are currently less than 1-in-6.
Shilling has cited the following factors as possible reasons for concern about the economy:
• Economic expansions typically last about three years and the U.S. is currently two years from the end of the last recession.
• Stimulus efforts have not had their intended impact.
• Weak job growth (mentioned above). The magnitude of layoffs has tapered off; however, hiring is on an as-needed basis.
• Solid corporate profits are not translating into solid wage growth.
• Personal consumption has not fully recovered. Wealthy consumers are the only group to have resumed previous spending patterns.
• Housing inventory is too high – there are 2 million homes on the market that aren’t moving. This in turn has reduced housing starts.
• A 20% decline in home prices is on tap for next year. If this happens, 40% of mortgages will be underwater and consumer will pull back.
Assuming that the Mayan’s doomsday projection doesn’t hold true, Coloradans can only hope that the Conference Board has a better pulse on the 2012 outlook than Shilling.
©Copyright 2011 by CBER.