[OPE] Blue Chip Economic Indicators

"The recession-mired U.S. economy is likely to shrink 1.1 percent next
year as job losses mount, according to (...) the Blue Chip Economic
Indicators newsletter (...) The jobless rate, which hit a 15-year high
of 6.7 percent last month, will likely continue to rise to average 7.8
percent for 2009, Blue Chip said. About 60 percent of the panelists said
the jobless rate, a lagging indicator of the economy, will not peak
until the first half of 2010 or later, even though the consensus is that
next year's economic contraction will be limited to the first and second
quarters."
http://www.forexfundas.com/tag/blue-chip-economic-indicators-newsletter/

This would imply that US unemployment would continue to rise and peak at
9-10% of the labour force, i.e. 14 million+ unemployed. The story is
very similar for the EU, where aggregate unemployment is at 7.8% now.
After that, it would take about half a decade, to reduce unemployment to
its former level. However, my prediction is that unemployment rates will
eventually "stabilize" at a higher level than previously, and that the
NAIRU will shift higher. The longer term perspective is a higher
average unemployment rate, higher inflation, and an even more ruthless
attempt to drive down labour costs.

Ben Bernanke counsels more "cooperation" between countries:

"Finally, a clear lesson of the recent period is that the world is too
interconnected for nations to go it alone in their economic, financial,
and regulatory policies. International cooperation is thus essential
if we are to address the crisis successfully and provide the basis for a
healthy, sustained recovery."
http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm

The trouble with that argument, as I mentioned before, is that as the
crisis deepens, conflicts of interest become more apparent and
competition intensifies - thus, precisely when politicians need
cooperation the most, it is the most difficult to obtain.

Jurriaan

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Received on Tue Jan 13 16:28:22 2009