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Wall St. Journal : The Case for Optimism on the Economy (Job Creation Only a Few Months Away)
Wall Street Journal ^ | 12/16/2009 | Alan Blinder

Posted on 12/16/2009 9:14:03 AM PST by SeekAndFind

The U.S. economy is digging itself out of a deep hole. You have probably heard a lot of doom and gloom lately, including talk of a jobless recovery, an L-shaped recovery (which means no recovery at all), or even a W—the feared double-dip recession. The Scrooges have a point: There are serious dangers to the nascent recovery. But you've heard all that many times. Let me offer instead, in deliberately one-sided fashion, the case for optimism. It is, after all, the holiday season.

The case begins with the "slingshot effect" I wrote about on this page last summer ("The Economy Has Hit Bottom," July 24, 2009). When the growth rate of any component of GDP rises, it gives overall GDP growth a boost. And going from sharply negative growth to zero is a notable rise. In July, the slingshot scenario was hypothetical—though likely. In today's economy, it's a real phenomenon.

During the first half of this year, the investment component of GDP declined at a stunning 38% annual rate. Since the investment share of GDP was then about 14%, this implosion accounted for minus 5.4 percentage points of GDP growth. But since overall GDP declined "only" 3.6% in those two quarters, the rest of GDP (the 86%) actually rose. It was a small but real reason for optimism in a stormy sea.

Then came the third quarter. Like a woozy prizefighter lifting himself off the canvas, the battered investment component of GDP managed to rise (at an 11% annual rate), which added 1.3 points to GDP growth rather than subtracting 5.4 points. That 6.7 point swing was the start of the slingshot effect, which is not yet over.

Investment has three components: business investment, inventory stocking, and homebuilding.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Culture/Society; Editorial; News/Current Events
KEYWORDS: economy; jobs; optimism; recession

1 posted on 12/16/2009 9:14:05 AM PST by SeekAndFind
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To: SeekAndFind

What is this guy babbling about?


2 posted on 12/16/2009 9:17:14 AM PST by fortheDeclaration ("Our constitution was made only for a moral and religious people".-John Adams)
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To: SeekAndFind
Obviously this author has not looked at the most recent Z.1 Flow of Funds report, released yesterday by the Feds.

Households and businesses are sinking into the deflationary quagmire. The Federal government's massive spending is the only thing keeping our economy from dropping immediately into a severe depression. But they're just making the ultimate problem worse by their actions.

3 posted on 12/16/2009 9:17:34 AM PST by politicket (1 1/2 million attended Obama's coronation - only 14 missed work!)
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To: SeekAndFind

The author’s case for optimism :

* Sometime in 2010, consumer spending must take over. rue, the average personal saving rate has risen to 4.5% of disposable income so far this year from 2.7% in 2008. That’s higher, but a long way from the 8%-10% saving rates the doomsayers have foreseen. A saving rate near 5% is consistent with 3%-4% GDP growth in 2010.

* The amazing performance of productivity during the recession. To be sure, that performance had a downside: While real GDP was falling 3.7%, payroll employment dropped 5%, devastating many American families. But by definition, that discrepancy means that productivity—output per hour of work—rose substantially during the recession, which is pretty unusual.

The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate.

* While payrolls continued to decline in November, it was by only a scant 11,000 jobs; and the job counts for September and October were revised upward. The data now show a clear trend that suggests that net job creation may be only a month or two away.

* Less than 30% of February’s $787 billion fiscal stimulus has been spent to date; over 70% is still in the pipeline. Pessimists dote on the fact that the rate of increase of stimulus spending has probably peaked and will be lower in 2010. True. But the level of GDP will continue to get support from fiscal policy, and a second job-creation package (”Please don’t call it a stimulus!”) looks to be in the works.

* The Federal Reserve’s stupendously expansionary monetary policy. It is well known that interest rates work on the economy with long lags. But the Fed’s last rate cut came a year ago. History suggests that the time lag is closer to two years than to one. So even the normal policy lags are not over.

* The Fed, Treasury, FDIC and others have created a bewildering variety of stents and bypasses to get credit flowing again. The credit markets are now healing, though slower than we would like. Hence there is still monetary stimulus in the pipeline.

* “Quantitative easing” is still in play. One example is the mortgage-backed securities (MBS) purchase program, which is adding MBS to the Fed’s balance sheet and providing vital support to the mortgage market.


4 posted on 12/16/2009 9:18:06 AM PST by SeekAndFind
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To: politicket

The author’s case for optimism :

* Sometime in 2010, consumer spending must take over. The average personal saving rate has risen to 4.5% of disposable income so far this year from 2.7% in 2008. That’s higher, but a long way from the 8%-10% saving rates the doomsayers have foreseen. A saving rate near 5% is consistent with 3%-4% GDP growth in 2010.

* The amazing performance of productivity during the recession. To be sure, that performance had a downside: While real GDP was falling 3.7%, payroll employment dropped 5%, devastating many American families. But by definition, that discrepancy means that productivity—output per hour of work—rose substantially during the recession, which is pretty unusual.

The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate.

* While payrolls continued to decline in November, it was by only a scant 11,000 jobs; and the job counts for September and October were revised upward. The data now show a clear trend that suggests that net job creation may be only a month or two away.

* Less than 30% of February’s $787 billion fiscal stimulus has been spent to date; over 70% is still in the pipeline. Pessimists dote on the fact that the rate of increase of stimulus spending has probably peaked and will be lower in 2010. True. But the level of GDP will continue to get support from fiscal policy, and a second job-creation package (”Please don’t call it a stimulus!”) looks to be in the works.

* The Federal Reserve’s stupendously expansionary monetary policy. It is well known that interest rates work on the economy with long lags. But the Fed’s last rate cut came a year ago. History suggests that the time lag is closer to two years than to one. So even the normal policy lags are not over.

* The Fed, Treasury, FDIC and others have created a bewildering variety of stents and bypasses to get credit flowing again. The credit markets are now healing, though slower than we would like. Hence there is still monetary stimulus in the pipeline.

* “Quantitative easing” is still in play. One example is the mortgage-backed securities (MBS) purchase program, which is adding MBS to the Fed’s balance sheet and providing vital support to the mortgage market.


5 posted on 12/16/2009 9:19:04 AM PST by SeekAndFind
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To: SeekAndFind

Blinder is well named. He’s a fool.


6 posted on 12/16/2009 9:19:12 AM PST by beethovenfan (If Islam is the solution, the "problem" must be freedom.)
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To: fortheDeclaration

This guy’s background (very similar to Ben Bernanke) :

Mr. Blinder, a professor of economics and public affairs at Princeton University and vice chairman of the Promontory Interfinancial Network, is a former vice chairman of the Federal Reserve Board.


7 posted on 12/16/2009 9:20:01 AM PST by SeekAndFind
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To: SeekAndFind
We are in a depression and it is growing deeper... only communists and obamites will tell you otherwise... or someone selling you snake oil.

LLS

8 posted on 12/16/2009 9:21:27 AM PST by LibLieSlayer (hussama will never be my president... NEVER!)
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To: SeekAndFind
Sometime in 2010, consumer spending must take over

Therein lies the rub. I don't see that happening

9 posted on 12/16/2009 9:23:13 AM PST by paul51 (11 September 2001 - Never forget)
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To: fortheDeclaration

LOL! Seriously! I was reading and thinking “I may another cup of coffee or 10 because this does not make sense!”

Woozy prizefighter, W’s, V’s... Does he every actually make a case as to why jobs are a few months away? I sure hope he’s right though.


10 posted on 12/16/2009 9:26:25 AM PST by autumnraine (You can't fix stupid, but you can vote it out!)
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To: SeekAndFind

“* The amazing performance of productivity during the recession. To be sure, that performance had a downside: While real GDP was falling 3.7%, payroll employment dropped 5%, devastating many American families. But by definition, that discrepancy means that productivity—output per hour of work—rose substantially during the recession, which is pretty unusual.”

So this means that people are willing to work like slaves for bare pay? Yay! The employers win! Not gonna get many votes with that continuing though.


11 posted on 12/16/2009 9:28:43 AM PST by autumnraine (You can't fix stupid, but you can vote it out!)
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To: autumnraine
LOL! Seriously! I was reading and thinking “I may another cup of coffee or 10 because this does not make sense!” Woozy prizefighter, W’s, V’s... Does he every actually make a case as to why jobs are a few months away? I sure hope he’s right though.

Any 'jobs' created will be phony, make-work ones, due to the stimulus money in order to make the numbers look good for the 2010 election.

12 posted on 12/16/2009 9:34:36 AM PST by fortheDeclaration ("Our constitution was made only for a moral and religious people".-John Adams)
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To: SeekAndFind
Economists are "blinded" by economic data, in this case.

IMO the economy is unable to recover from the downturn because the Obama administration is still threatening to kill the free market and replace it with Socialism.

Since small business is unable to make hiring and spending decisions until it has a clear and optimistic vision of the future of the free market, such recession will continue until Obama is either neutered OR until Obama wakes up and makes a dramatic move to the center and commits to the abandonment of his Marxists ideas.

Even then, I don't know if small business will have sufficient confidence that the Obama will not rise from the dead and renew his march to Socialism.

BTW, I met yesterday with a local banker and she thought Obama's exhortation to banks to begin lending was "laughable."

She said that Obama is a black cloud hanging over small business yet he blames the banks for not lending in such a unstable environment.

Obama doesn't get it! He thinks he can use the bully pulpit to make business grow!

13 posted on 12/16/2009 9:39:33 AM PST by SonOfDarkSkies (The Mahdi turned out to be a Marxist! Who knew?)
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To: SeekAndFind

Just close your eyes ,keep saying “the economy is going to get better” and click your heals and everything will be all right!


14 posted on 12/16/2009 9:46:33 AM PST by jroneil (2010 is all that matter now!)
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To: SeekAndFind
Shilling for the Democrats, looking for that stimulus money to be dumped into the economy just in time for the election.

Despicable.

15 posted on 12/16/2009 9:51:53 AM PST by Carry_Okie (Mao was right about power and guns; which is why he confiscated them.)
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To: SeekAndFind

Can someone please give me access to the drugs this guy is taking. I want to be happy and optimistic in the face of bad news and a bad outlook.

Just wait ‘till the Christmas shopping is done. It is currently tracking at 20% lower than last year. Many a company will go under based on this.

— Beans, bullets, band-aids and bullion.


16 posted on 12/16/2009 9:53:36 AM PST by Drill Thrawl (Another day, another injury, another step closer.)
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To: Drill Thrawl
Just wait ‘till the Christmas shopping is done. It is currently tracking at 20% lower than last year.

Not good IMO. Last year's shopping season was already HORRIBLE.
17 posted on 12/16/2009 9:55:05 AM PST by SeekAndFind
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To: LibLieSlayer

We were not in a depression, just a deep recession and it is more or less over as of Q3. The return of the stock market and other signals are showing the crisis is over.

Unemployment however will remain high and long-term growth subdued because Obama and Co have a job-killing agenda.


18 posted on 12/16/2009 10:07:49 AM PST by WOSG (OPERATION RESTORE AMERICAN FREEDOM - NOVEMBER, 2010 - DO YOUR PART!)
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To: SeekAndFind

Pay your debts. Build a deep larder.


19 posted on 12/16/2009 10:07:55 AM PST by Drill Thrawl (Another day, another injury, another step closer.)
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To: SeekAndFind
Seriously, do you really believe any of this?

The credit markets are unfreezing? Please....

None of the important data supports that conclusion.

The only way that one could pretend our economy is out of the recession is if they completely ignore the credit market. That would be too bad, since the credit market is what is causing all of the problems - and I fully believe that the big banks did it intentionally.

20 posted on 12/16/2009 10:11:29 AM PST by politicket (1 1/2 million attended Obama's coronation - only 14 missed work!)
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To: WOSG
I own three businesses... have dozens of friends that also own businesses... I know what I see at the wholesale level and while you may actually believe the spin you repeat... those of us on the front lines KNOW the TRUTH. There will be no turn around in the economy at all... and no jobs means no prosperity.

LLS

21 posted on 12/16/2009 10:16:08 AM PST by LibLieSlayer (hussama will never be my president... NEVER!)
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To: SonOfDarkSkies
She said that Obama is a black cloud hanging over small business yet he blames the banks for not lending in such a unstable environment.

Obama doesn't get it! He thinks he can use the bully pulpit to make business grow!

Put an economic nincompoop in the White House and they always think they can cajole, threaten, or cheerlead the economy into changing. Remember "WIN" buttons?

Drop cap gains to 5%, get rid of corporate income taxes altogether, and make the Bush cuts permanent and you'll see growth. Serious growth. Quickly.

22 posted on 12/16/2009 10:16:44 AM PST by Campion ("President Barack Obama" is an anagram for "An Arab-backed Imposter")
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To: LibLieSlayer

Saying “depression” and “no turnaround” are two distinct things. It appears we are in an “L” shaped economy, with weak recovery off a low base, but multiple data points show higher activity in Q3/Q4 than Q2, so ‘the bottom is in’ and to call this a ‘depression’ is overstating things. Your own experience/ points do not contradict that view and even if you see things weaker than others that does not mean other parts of economy aren’t past the bottom. In other words, your own anecdotes are not determinitive of whole USA.


23 posted on 12/16/2009 12:43:01 PM PST by WOSG (OPERATION RESTORE AMERICAN FREEDOM - NOVEMBER, 2010 - DO YOUR PART!)
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To: WOSG
Give it six months and we shall see... I hope that I am wrong but 36 years experience tells me otherwise.

LLS

24 posted on 12/16/2009 1:02:34 PM PST by LibLieSlayer (hussama will never be my president... NEVER!)
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To: LibLieSlayer
And Blinder has said how bad, 'horrendous';

Transcript of Pelosi, House Democratic Leaders, and Economists’ Press Conference Following Economic Forum

http://www.realestaterama.com/2009/10/22/transcript-of-pelosi-house-democratic-leaders-and-economists%C3%A2%E2%82%AC%E2%84%A2-press-conference-following-economic-forum-ID06137.html

Former Federal Reserve Vice Chairman Alan Blinder

“So for that reason, despite the fact that we’re looking at an absolutely horrendous long-term fiscal outlook,

I, like Mark, and I think most of us around the table, believe that at least a modest, now this is where people will disagree[All Democrats], but at least a modest increase in the deficit is targeted very strongly on job creation.”
25 posted on 01/02/2010 4:51:48 AM PST by Son House (The Learning Curve for Democrats on Macroeconomics is getting Exponential)
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To: SeekAndFind
What an idiot.

The entire reason that stocks did well in the 3rd quarter was because the Dollar was going down like the Titanic. GDP went up because foreign buyers were taking advantage of the real bargains and the weak Dollar.

Wait till the old tax cuts expire and new taxes kick in. Watch for massive layoffs, government EPA regulations more like Gestapo doctrine and hyper inflation starting n 2010.

These are the same economic geniuses who did not have a clue that the crash last 2008 was even remotely going to happen.

26 posted on 01/02/2010 5:04:56 AM PST by PSYCHO-FREEP
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To: SeekAndFind

65000 jobs/d.....aren’t returning next week..next month...or next year...until Cap Gains tax zeroed out....until mortgage interest paid has been applied to principle...until the K St federal regulatory lobby is as unemployed as the rest of America....


27 posted on 01/02/2010 5:09:22 AM PST by mo
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To: Son House
There will be no job growth for all of 2010... oh they may play numbers games and lie to us that there are... but those of us that have been around long enough to know the difference between academic economics and real world economics can see the truth.

LLS

28 posted on 01/02/2010 6:10:33 AM PST by LibLieSlayer (hussama will never be my president... NEVER!)
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To: WOSG
Remove the Federal money give away from your figures and there was no growth at all... we are in a depression... if not now we soon will be... and my three businesses and everyone that I know that owns their own businesses here, thinks we are in a depression also. Real world reality is a b!tch!

LLS

29 posted on 01/02/2010 6:14:56 AM PST by LibLieSlayer (hussama will never be my president... NEVER!)
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To: WOSG
I shall revisit this with you after a few more months of this hell. Happy New Year... at least happy in the things that really count... because there will be no economic happiness. Crap and traitors, amnesty, health care socialism, Bush tax cuts expiring, all financial activities being taxed... increased income taxes at the State and Federal level, increasing deficits that can never be repaid, new users fees at the State and local levels and fines and mandatory insurance... yep... there is so much going on in 2010 to heal a dying economy. I saw Santa Claus too!

LLS

30 posted on 01/02/2010 6:20:59 AM PST by LibLieSlayer (hussama will never be my president... NEVER!)
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To: SeekAndFind

Now we have terror to worry about — no doubt fewer peple will fly.


31 posted on 01/02/2010 6:36:08 AM PST by WashingtonSource
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