We’ve been told every year that 3.5% GDP growth is coming. The gaggle of PH.D’s at the Federal Reserve said growth in 2011 was supposed to be 3.4 to 4.5%. In 2012 things were to be even better with growth between 3.5% and 4.8%. Instead the numbers came in at 2% and and 1.5%.
Ah, but nobody’s paying attention, except Neil Irwin at The Washington Post, who writes in WonkBlog,
What’s amazing is that the Fed’s newest projections, released in December of 2012, look like they could have been copy and pasted from 2009, just with the years changed: They forecast sluggish growth in 2013, 2.3 to 3 percent, followed by a pickup to 3 to 3.5 percent in 2014 and 3 to 3.7 percent in 2015.
Irwin writes that the Fed and the CBO seem to just be pushing back their respective rosy scenario numbers as the years pass thinking eventually the economy will get untracked given the massive monetary stimulus the central bank keeps injecting.
He even takes on the notion that we’ve had bad luck like the Japanese tsunami and the European crisis. He points out there has been some good luck; falling natural gas prices, steady crude oil prices, and a rising yuan.
Seeing the glass as half full is Keith McCullough, CEO of Hedgeye Risk Management. He told CNBC last week that he thinks unemployment rate might improve to below 7 percent by the fourth quarter. McCullough, who must not get out much, claims that from a housing and employment perspective U.S growth is “pretty solid.”
The wind blowing in the face of that idea is the January increase of the payroll tax from 4.2% to 6.2%. The average person is feeling the pinch in their wallets and GDP growth will suffer is the view of Lombard Street Research.
“Our view that unemployment could rise above 8 percent and that profits will be squeezed reflects a forecast of nil to negative 2013 (first quarter) growth, and further stagnation in (the second quarter),” a Lombard Street report released on Friday said.
Over at Wal-Mart (WMT) an internal email asked recently, “Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?” The payroll tax hike has led to the retail giant’s worst January start in 7 years.
Executives for the company are calling the start to the year a “total disaster.” Brad Plumer writes for WonkBlog,
So if Wal-Mart is struggling, does that mean everyone else should worry? There are two ways to look at this. The first is that this is a terrible omen. Wal-Mart makes up such a huge chunk of the U.S. economy — 2.3 percent of GDP in 2006 — that many analysts look to it as a key bellwether.
Matt Stoller wrote in a blog post awhile back, “Fed Board Governor Randall Kroszner said in a June 2006 meeting, Walmart officials ‘effectively know what retail sales are before the numbers are reported because their sales are so highly correlated with overall retail sales.’”
Looking for economic growth and lower unemployment? Listen to WalMart, not the PH.D’s at the Fed.