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Monday, November 23, 2009

A Mixed Bag from the NABE

The National Association for Business Economists is the gold standard in economic projections. In fact, we've dismissed such "trivialities" as waiting for two consecutive quarters of actual job growth in favor of these 48 economists telling us when recessions begin and end. They've come out with their forecast for jobs.

Leading economists who just last month declared the end of the recession, which began in December 2007, but warned of continued job struggles, said today in a new survey the economy is poised to add jobs "within the next few months."

The survey from the National Association for Business Economists reaffirmed the October assertion the recession is over.

"While the recovery has been jobless so far, that should soon change. Within the next few months, companies should be adding instead of cutting jobs," said NABE President Lynn Reaser, chief economist at Point Loma Nazarene University.

The news isn't all good. The NABE predicts that unemployment will still be at 9.6% by the end of 2010. It predicts that we won't gain all our jobs back until 2012.

Now, let's put some context to this. The same NABE predicts the monthly jobs number along with a plethora of other economic statistics. If you follow the jobs number or just about any other economic statistic, then you know the real shock is when they actually predict it right. I am not knocking any of the NABE. Predictions are very difficult. Just look at any so called experts' prediction pre season for the World Series, Super Bowl, etc.

Predictions are almost always worthless except that reality is always measured against them. Markets turn not simply based on a number alone but on how that number fared against the prediction. The latest jobs' number wasn't good or bad, most importantly, it was slightly worse than expected.

So, the markets will digest this number and then they'll digest reality. If reality is better than the prediction the markets will go up and vice versa. If these numbers eventually reflect anything near reality, the Democrats have serious problems. Going into mid terms with near double digit unemployment having spent trillions and telling America that unemployment won't pass 8% is not a place I'd want to be.

2012 is significantly more difficult to believe. Most people look at the current situation. If unemployment is between 5.5%-4.% as the NABE predicts, that will be good for the party, no matter how long it took to get there. Still, 2012 is a long way away. Much will happen between now and then.

November 2010 is much closer. If the NABE is right, I predict that Republicans will challenge for majorities in both chambers.


Anonymous said...

That is an insane Senate prediction. The Senate is 60-40. The Republicans would need to pick up 10 seats just to get close. Are there even that many Democrats up for re-election, much less vulnerable Democrats? And do you really, truly, honestly believe that the Republicans will hold all of their seats?

As far as the House, you'll probably pick up seats, but the only way you'll retake the House is if some Blue Dogs change parties, which is entirely possible. If there's anyone who believes Republican talking points, its conservative Democrats.

mike volpe said...

That's a hypothetical on top of a hypothetical. So, it's a fairly silly argument. Yes, there are plenty of vulnerable Dems: Dodd, Reid, Lincoln, Illinois (that's vacant), New York, California, etc. So, ten is outside but possible. Seven, eight, and nine, are very possible.

In the House, everyone that voted for Health Care, Stimulus et al would be vulnerable if unemployment is at 9.6% since they will be blamed for the problem.