The Tentative Market
Last Friday the Labor Department announced that the U.S. Economy added 176,000 private sector jobs in April while shedding about 11,000 in the public sector. The stock market rejoiced. The private sector number will likely be revised upward next month when May’s numbers come in, as has been the pattern for a while. So far, during 2013, the economy has added an average of nearly 200,000 jobs per month according to an article in the New York Times.
However, everywhere we look there are stories of decline and sluggishness. In my own unscientific data gathering I see great signs of new company formation, of venture capital and private equity companies sifting the industry, calling me up for ideas, and trying to put some of their huge stockpiles of money to work. I also see too many companies trying to participate in what ought to be a recovery but they’re putting only one foot into the water, testing it but not committing enough to make a real difference.
So I see many vendors spending a little on marketing but only enough to keep them from missing the next wave, if that wave indeed comes in, but not enough to really make the wave happen. That kind of strategy works well in one’s personal life — at a micro economic level — but it makes for poor macro economic performance.
In any economy, my spending is your income and vice versa, so if everyone takes an approach that they aren’t going to spend, the result is a recession. Incomes go down, economic activity is slow, you know the drill.
According to the U.S. Bureau of Economic Analysis, the Gross Domestic Product (GDP) in the United States expanded 2.5 percent in the first quarter of 2013 but the long-term average from 1947 to the present is 3.23 percent.
On the employment front we are trending down from the eight percent range. Unemployment was 7.5 percent in April according to the Bureau of Labor Statistics. The same office showed unemployment between 4.5 percent and 5.0 percent throughout 2007, the low point before the economy cratered.
We’re stuck in a false dichotomy in which we are all waiting for someone else to start the heavy lifting. But there is no one else. Perhaps now that Reinhart and Rogoff’s analysis supposedly showing austerity is the solution to the stagnation that afflicts us, has been proved false, we’ll start to see more of a turnaround. But the economy is big and not subject to being turned on a dime. Nevertheless, I am thinking that 2013 is a pivot year, that things accelerate from here. That’s why I get concerned about timidity in the face of what I see as great opportunity.