Posted on 04/11/2010 4:13:41 AM PDT by expat_panama
Sometimes you have to take out your political lenses and look at the actual statistics to get a true picture of the health of the American economy. Right now, those statistics are saying a modest cyclical rebound following a very deep downturn could actually be turning into a full-fledged, V-shaped, recovery boom between now and year-end.
I'm aiming this thought especially at many of my conservative friends who seem to be trashing the improving economic outlook -- largely, it would appear, to discredit the Obama administration.
Don't do it folks. It's a mistake. The numbers are the numbers. And prosperity is a welcome development for a nation that has suffered mightily.
Credibility is at issue here. Conservative credibility. Capitalist credibility.
Now, I have written extensively about the tax-and-regulatory threats of the Obamanomics big-government assault. But most of that is in the future. The current reality is that a strong rebound in corporate profits (the greatest and truest stimulus of all), ultra-easy money from the Fed, and some small stimuli from government spending are working to generate a stronger-than-expected recovery in a basically free-market economy that is a lot more resilient than capitalist critics think.
Rather than blow their credibility over a cyclical rebound that is backed by the statistics, free-market conservatives should tell it like it is.
Let's begin with the March employment numbers recently released by the Labor Department. Those numbers were solid. People say small businesses are getting killed by taxes and regulations from Washington, but the reality is that the small-business household employment survey has produced 1.1 million new jobs in the first quarter of 2010, or 371,000 per month. If that continues, the unemployment rate will drop significantly.
Additionally, the corporate payroll number for March increased by 224,000 -- not 162,000 as some claim -- with the prior two months being revised up by 62,000. And this is being led by private-sector job creation.
And according to just-released data, retail chain-store sales for the year ending in March were up a blowout 10 percent. Ten percent. That's a V-shaped recovery. And the real-time ISM purchasing-managers reports for manufacturing and services indicate that the economy in the next few quarters could be much, much stronger than the consensus expects -- maybe 5 to 6 percent. Another V-shaped recovery.
Commodity charts, meanwhile, are roaring. All manner of raw industrial materials have been booming -- iron ore, steel, you name it. More V-shaped recovery. So with higher commodity prices running virtually across-the-board, there is every incentive for rapid inventory-rebuilding. (Inventory prices are going up as commodity prices go up.)
At this point it's impossible to project a long-lived economic boom, such as we had following the deep recession of the early 1980s. For one thing, tax rates will rise in 2011 for successful earners and investors, quite unlike the Reagan cuts of the 1980s. So it's possible that entrepreneurs and investors are bringing income, activity, and investment forward into 2010 in order to beat the tax man in 2011. This would artificially boost this year's economy, stealing from next year's economy.
Recall that when Hillary Clinton took her Rose Law Firm bonus in December 1992, rather than January 1993, she knew full well that her husband Bill would raise the top tax rate in 1993. So the fourth quarter of 1992 grew at nearly 4.5 percent, but the first quarter of 1993 saw less than 1 percent growth. The temporary growth spurt for all of 1992 was 4.3 percent, but activity dropped to 2.7 percent the following year.
It could happen again in 2010 and 2011. Although the Obamacons deny it, tax-rate incentives matter a lot.
And at some point, monetary policy will tighten, with higher interest rates on top of higher tax rates. That, too, could slow growth markedly next year. And then there's the dozen tax hikes in the Obamacare health takeover, and a possible VAT attack from Paul Volcker, all of which will work against growth in the out-years.
Clearly, we are not operating a supply-side, free-market model today. What I wish for is sound money and lower tax rates, which would promote sustainable economic growth. Instead, we're getting easier money and higher tax rates, which could mean a temporary boom today and disappointingly slow growth after that.
But then again, who knows? Maybe the tea-party revolution overturns the obstacles to future growth and the boom is sustained. Free-market populism and a return to Reaganism, along with an anti-federal-spending coalition that is the most powerful force in politics today, could right the economic ship.
That's the credible take.
Ah. So if you're throwing away all your worthless Federal Reserve Notes, please let me know and I'll come over and haul away your trash for you.
Who’s numbers? Cooked Books anyone? He must be limiting his reading sources. Last I looked, the Republics of Kalefornia and New Yuk are about to collapse. Since either is greater in size than most of the European Socialist Combined; America, I think we have a problem.
Yes, it is Larry. And, this is the form of capitalism that has ruined our country. Look at the now and make your money and to hell with the long term outlook!
Capitalism, like socialism loses its credibility when it espouses taking profit in the short term to the detriment of the long term.
Giving Obama and credit for this small spike is absurd. I STILL don't know what the market is growing on.
If it is to be a “V” it will be a peculiar one. This “V” already has a wide flat bottom, if bottom it be.
I have written extensively about the tax-and-regulatory threats of the Obamanomics big-government assault. But most of that is in the future.
But, Larry, business makes decisions about expansion based on perceptions of the future business climate. It's clear that, if Obama's policies are implemented, the climate will be dismal.
Apart from health care uncertainty, there's the specter of CO2 caps that the EPA is implementing very soon as well as quickly rising energy prices with no opportunity to drill in the US.
The economy will undoubtedly improve somewhat, but business is not going to spend any capital on expansion. Economic growth is synonymous with capital accumulation -- we're consuming capital; not accumulating it.
The recovery may, indeed, be "v-shaped", but it will be a distinctly lower-case "v".
In my opinion the markets are exactly like a slot-machine with a progressive jack pot. The number (DOW) keeps going up. but eventually someone is going to pull the lever and cash out...... everyone else will be left feeding the machine.
I can't see anything that put the markets to increase... jobs continue to be lossed, spending continues to increase, taxes continue to increase, and companies continue to release reports they will take healthcare hits in the tens of millions, hundreds of millions, and even billions of dollars...... this just spells more layoffs, downsizing of industry (or moving offshore), followed by a shrinking tax base. It seems like we're just circling the bowl, but they can't quite plunge us down (I apologize for that visual).
The only thing I could see making a "V" is money. Deflation as more people stop buying and prices drop...... followed by a hyperinflationary lift off as funny money hits the system and the interest rates rise because our creditor masters want better return on their money.
Kudlow always is a sunny optimist when it comes to the economy. Nothing new about that. He is what he is.
Of course he is wrong about a recovery. Once the Bush tax cuts expire and taxes go up because of ObamaCare then the economy will tank hard.
....I want to see solid corporate earnings before I’m convinced.
I think he is not discerning between a “sustaining” economy and a “roaring” economy. We saw a somewhat “roaring” or at least well-engaged economy during most of the Bush tenure. Housing prices up and unemployment way down. In fact 4% unemployment is considered “full-employment”, the theory being there are always 4% of workers, moving and looking for work or quitting for personal reasons. In other words, in 2005/06, if you didn’t have a job, you probably didn’t want a job.
Not so, now. People are being laid off and the remaining workers are doing 2 and 3 people’s jobs. As a result, efficiency, and therefore productivity is up and this leads to the stock market going up. But this is a sustaining economy ... people are buying only what they need. Extras and luxuries are generally not being purchased. So Kudlow sees commodities going up. Right, i.e., basics to the economy.
But this will not lead to increased employment. Higher taxes, even by his own words will put the brakes on any small recovery.
Here is a small example from the current news. Nicolas Cage put his island mansion up for sale for 35 million and got no offers whatsoever. Would this have happened back in 2006? I don’t think so.
I believe conservative principles are always right. Any economy has variables and ups and downs. But in the long run, if you want to increase employment, lower taxes. Lower interest rates. Reduce regulations. Reduce entitlemnents and welfare. When you do this, just about everyone is looking for a job and the economy picks up. It’s not hard to know what to do, just hard for Democrats to do it.
not to mention most state governments in the red, California is toast... It appears the very worst is still yet to come. I hope it turns around but our money is worthless paper backed only by debt and false promises.
We need to remember to make the good better. All this toxic depression is for losers.
Larry must have had some really good mushrooms on his pizza last night.
Why is it so hard to comprehend that the ONLY thing that is producing these outward (and temporary) signs of “recovery” is MASSIVE and unsustainable spending of money we don’t have and will never be able to repay, by our criminal federal government?
phhhhllllltttt — You can talk yourself into anything ... That doesn’t make it true. The people I know have and had real businesses.
One friend down the street shuttered his decades long company employing 700 people because the turnaround is just ahead.
Another fellow has put his plumbing company on sustained life support in the last few weeks. He did new home construction. Said the market had washed out for new homes. Turnaround ahead.
The car dealer friend has closed and sold off his lot ... Because the turnaround is just ahead.
Turnaround just ahead — Printing money is a fools game to play for ignorant people’s votes. Like South America where there is no middle class, only wealthy and the underclass, like Kenya.
Nothing will change until we get rid of the Marxist debris infecting our government. Regardless what Kudlow or the rest have to say.
Good article Larry. Yes we are headed on the road to ruin. No that doesn’t mean there are no hills on the road. Pretending there aren’t makes people look as self-delusional as the obamabots. And absolutely true, if we get a clean sweep in November key points could change.
The American public has been lied to for so very long that they believe the state run media and they no longer think, in fact, it appears they cannot think independently.
What is obvious to you and me is unthinkable to the American public. Obama is a radical who is destroying America and he will continue until he is stopped.
I hope you, and Mr Kudlow are right. I am one of those people in the job market right now. I am trying to relocate to GA to be with my wife and kids.
However, I just do not see how a regime that has done every single thing, it could do economically, wrong still manages to produce a V shaped recovery.
WTF? How do you call running up trillions of dollars of unfunded liabilities and debt conducive to economic recovery? The dirty little secret in all this is that by the end of this year taxation will be greatly ramped up on the investing class and all they are doing at this point is trying to maximize profits before selling off before the storm.
Yes, some ‘economist’ may being there is a very important election in November. Spring time always add jobs. Will Summer, Fall and Winter follow Kudlow’s trend? Not with narrow ‘tax credits’ being the incentive.
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