That's what "coming out of a recession" looks like?
Posted on 03/28/2015 9:29:31 AM PDT by Kaslin
The economy has been in a tepid, soft, slow recovery for the past five-and-a-half years. It’s the weakest rebound in generations. The Commerce Department’s revision of fourth-quarter GDP shows that nothing much has changed. Over the past year, real economic growth registered 2.4 percent, slightly higher than the recovery average. It ain’t much.
Meanwhile, winter economic reports for retail sales, manufacturing, and capital investment point to a weaker first quarter, perhaps around 1 percent. And Wall Street is talking about a possible profits recession, with expectations of a 2 or 3 percent drop in corporate earnings for the first half of 2015. So the market bears are out in full force.
Now, let’s acknowledge that coming off a deep recession, the rebound should have been 4 or 5 percent, not 2 percent. By some calculations, GDP is 10 percent -- or nearly $2 trillion -- below its long-term trend, and jobs may be lagging by 8 to 10 million.
Government entitlement transfers pay people not to work. Family breakdown has created a poverty trap for the lowest economic groups. Upward mobility is lagging. And the government has attacked the high-end movers and shakers with tax hikes and overregulation.
And unfortunately, a damaging business psychology prevails. It says that success must be punished, and that redistribution is the way to solve inadequate growth, inequality, and unhappiness.
But . . . all this said . . . it’s possible to be too pessimistic.
Let’s start with profits, the mother’s milk of stocks and lifeblood of the economy. The recent GDP report shows a slight profits decline in 2014, the first in years. But this is misleading.
More important, the core measure of earnings, domestic nonfinancial profits, increased 1.4 percent in the fourth quarter and 7.8 percent for 2014. On an annual basis these profits increased $262 billion and were widespread across industries.
The big problem is not the U.S., but the rest of the world, which is mostly in recession and saw profits drop $36 billion in the fourth quarter. At roughly 18 percent, profits from the rest of the world account for the smallest share of corporate earnings since 2006.
By the way, GDP profits from the National Income Accounts are far larger, and therefore more telling, than S&P 500 profits. Initial quarterly estimates from GDP cover about 9,000 companies. Over time, annual revisions will cover roughly 4 million companies. And GDP profits are benchmarked to IRS tax filings, with no accounting shenanigans.
Another economic positive is the rise of the consumer. Rex Nutting of MarketWatch reminds us that consumers got a big windfall from plunging energy prices. So far they’ve saved it, but that may change. Real incomes adjusted for taxes and inflation jumped at a 7.7 percent annual rate over the past three months. This could set the stage for a big boost in consumer spending.
The terrible winter has taken its toll in Q1. But family spending may jump come spring and summer. Along with this, the basic core of the private economy (consumption plus investment), which rose over 4 percent in the fourth quarter and 3.3 percent for 2014, will continue to advance.
Did somebody say King Dollar? It’s holding down consumer prices and business costs (including energy). Even with a lousy world economy, U.S. exports increased 4.5 percent annually in the fourth quarter while imports jumped 10.4 percent. So U.S. businesses are very competitive regarding export sales, and the rise in American imports from overseas will bolster the international economy.
One last encouraging point: C&I business loans have increased over 15 percent annually in the last three months and about 12.5 percent in the past year. That’s a good sign, especially for Main Street business activity, which has been lagging for years.
The Fed will probably raise its target rate later rather than sooner, smaller rather than larger. I’m betting on October and December for some quarter-point rate hikes. That’s consistent with a high dollar and low commodity prices. I doubt long-term rates will change much at all.
So moderate growth, rising core profits, and a still accommodative Fed set the stage for a better stock market as the year goes on. I’m still in the “buy the dip” camp. We’re not going to get the kind of growth that America is capable of producing until we get tax and regulatory relief and a better attitude about free-market capitalism. But I wouldn’t get too pessimistic.
There’s no recession or inflation in sight, and America is a very resilient place.
Don’t bet against it.
Question: How many Americans were forced out of the labor force in 2008? That really, really tremendously deep recession? The one that was totally Bush's fault?
And how many Americans are out of the labor force now, after 6 years of recovery? I think it's only gotten worse.
And how many trillions of dollars have been added to the debt over these past 6 years? Improvement? I don't think so.
And Obamacare -- net gain or net loss to American families?
Are we actually coming out of the recession? Or has it just been deepening for Obama's entire time in office?
Proof that many a so called journalists DO NOT see the forest for the trees.
Yeah, Kudlow suffers from two diseases:
A: He is the eternal optimist about America and the economy.
B: He just deals inside the Manhattan to DC corridor, and never sees the real world.
Too bad - his instincts are great - but he’s out of touch.
But overall, small town America is still hurting and has little means to recover.
What can a small town entrepreneur do, open a hamburger stand, a corner drug store, a neighborhood hardware store, a grocery store?
Someone from out of town already owns that market and the best you can hope for is a $15 an hour job as a manager
The answer is it was the Rat party who did. Before they got the majority in the 2006 election because so many on our site wanted to teach the GOP a lesson, there was nothing wrong with the economy. The economy was thriving and unemployment was practically nonexistent. Things changed when the rats took over.
So no, it was not President Bush's fault, but the rat's fault and those on our site who sat home and let the rats take over
Larry is a bit more than a journo though, he worked for Reagan under Dave Stockman.
I’m not saying I agree 100% but he’s an interesting guy.
That's what "coming out of a recession" looks like?
the rate of homeownership in the United States has fallen to a 20 year low.
Perhaps Larry needs to curb his economic optimism......He’s a super Pollyanna.
The only problem is with the percentage of the US population that is making and accumulating that money.
What you are currently seeing is the consolidation of wealth. This has happened many times throughout history.
This is the tipping point where the US goes from being a republic, and becomes an empire.
And so the story of the US draws to a close.
Less happy talk and more realistic appreciation of this dire situation is called for. Only then will we start solving it.
We seem to be bumping along the bottom.
Every time we hit a bump and go up we feel a tingle go up our leg.
Every time we bump down its just the pits.
Wow. An article that actually calls it.
“..And the government has attacked the high-end movers and shakers with tax hikes and overregulation.
And unfortunately, a damaging business psychology prevails. It says that success must be punished, and that redistribution is the way to solve inadequate growth, inequality, and unhappiness.”
And I would add taxes and regulations on the people and small businesses.
Instead of some garbage about monetary policy, get the government out of businesses and peoples way; remove regulations and taxes, and watch the economy grow like crazy.
It is a "disease" now to be optimistic about America, is it?
And because you are by contrast so much more the pessimist, what you have to say allegedly somehow carries more weight?
Larry's opinions have been published and read since the Reagan years and his optimism -- also scoffed at at the time by liberal "intelligentsia"-- was reflective of the success of that era as well.
Your depression-laced blogs will be forgettable long before you have even composed them, Eddie.
Maybe your opinions will gain some standing when they can garner the media exposure Kudlow has had for 30 years, and demonstrate any credible hope of remaining 1/2 as relevant 30 years later.
Until then, "C. Edmund"'s blogs will rate about the same as might a "Crazy Eddie" blog on "-ludes."
FreeRepublic ought to consider awarding "Eeyore"'s to some depression-driven posters around here the same way the political analysts award "Pinocchio"'s to all the "politi-fibbers."
5%-7% official unemployment
10% more of the adult population early retired/disabled/detached from workforce
So roughly 1/8 not working who used to be
Just stop it Larry. There is no rebound you moron. 93 million people out of work. We are in an ongoing Depression not recovering from a Recession. We have no chance of seeing anything positive for at least 22 months because Barack Hussein Obama works tirelessly to prevent it.
Whoa there aggie - you need to climb down off of your high horse - and do it carefully so you don’t snag your skirt.
It is a disease to be optimistic about America in general? No. Is Kudlow guilty of being overly optimistic? Yes, for many years. But that’s not the point.
To correct your major mistake, optimism under Reagan is well founded. Much of the opportunity we had under Reagan is long gone, thanks primarily to Obama and The Fed. Kudlow has not seemed to understand that. He seems not to understand the disaster main street entrepreneurialism is under.
And I have no depression blogs - you are on crack.
Yet, somehow despite all that, it is he who appears to live inside your head, not the other way around. And for what it is or isn't worth, Rove's and Kudlow’s opinions are sought out and actually get frequent air time in major media, where, quite unsurprisingly and by contrast, yours does not.
Your negativity will forever wilt in the presence of someone who has true intellectual heft:
“I'm optimistic because of you. I'm optimistic because I believe in the American people. And I'm optimistic, because I am convinced, God isn't done with America yet.”
--Ted Cruz, Liberty University, Monday, March 23, 2015
Kudlow’s and Cruz’ optimism will be going strong long after your dated, stale, foul-mouthed, and depressed little blog-lumps of album graecum perpetually fade into the abyss of their ever diminishing price points, even as one such as yourself eventually finds their negativity confined to their own personal treadmill of irrelevance.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.