To Tell the Truth was a game show where celebrities would try and determine which contestant was telling the truth and which were the impostors. After making their guess the host would ask, ‘would the real______ please stand up?’
What is the real economy? There’s no shortage of sources and opinions about today’s economy. Who is telling the truth? Let’s see if we can identify the impostors and guess correctly.
Allow me to introduce our contestants.
Morgan Stanley economist Vincent Reinhart says the trajectory of economic activity hits an inflection point midway through 2013, and the expansion of real GDP steps up to around 2-3/4 the second half of this year and beyond. (Business Insider).
Bert Dohmen editor of the Wellington Letter and founder of Dohmen Capital Research Institute says the 0.1 percent contraction (since revised to a 0.1 percent increase) in the fourth quarter proves the economy isn’t in recovery mode. Dohmen says if you factor in the real rate of inflation instead of the phony CPI we’re already in recession. (Financial Intelligence Report)
Goldman Sachs chief economist Jan Hatzius when asked if the tax increase will throw the US economy back into recession said, ‘No. To be sure, it will deal a heavy blow to household finances, and we therefore think consumer spending will be weak this year.’ (Calculated Risk)
Lakshman Achuthan economist and head of the Economic Cycle Research Institute says even though the stock market has hit a series of record highs this week he’s not budging from his call that the US economy has been in a recession since the middle of last year. (CNN Money)
Who is telling the truth? We seem to already be in a recession or we are reaching an inflection point and the economy is growing. Guess those are our two choices. Before we make our decision, let us consider these factors.
Although the unemployment rate fell to 7.7% the reason was not as claimed by the stenographers at AP, due to 236,000 jobs created, but due to more people falling out of job searches as the workforce participation rate of 63.5 is back to the same as 1981.
Although weekly initial claims for unemployment insurance have fallen that has not translated into more hiring. There remains over twenty two million unemployed or underemployed, and over half of the unemployed for over six months.
If employment is the best measure of an economy then the perpetual twelve million unemployed aren’t a positive sign. The over ten million underemployed will be getting lots of company in the next few months.