Why So Gloomy? KEO, part 1

The first few questions from the Kauffman Economic Outlook Q1 2010 focus on the overall U.S. economy, and our summary emphasized the gloominess of the blogger's consensus opinion.  Here are the individual charts (in .gif format) from this section:

 
One could say there is no consensus either way based on the first chart, but that is wishful thinking. The natural state of the U.S. economy, historically, is growing.  So even if a majority of the panel say things are "mixed," it is lower than expected.  But the fact that opinion expressed off neutral is 5-1 negative, and the extremes are 5-1 negative, the consensus is powerful. Finally, consider the 20 comments given by survey respondents:

1. Outlook differs strongly from region to region.
2. At the moment, we have growth without new jobs.
3. Output is expanding, but the prospects for job creation are fairly bleak
4. momentum of growth picking, but much weakness
5. It is important to distinguish the real economy from the financial economy and the stock market. The real economy has not benefitted at all from the stimulus. In fact, it has been harmed by it.
6. I actually have a bet with David Henderson of EconLog that we will experience double digit inflation as well as double digit unemployment within the next 6 years
7. The risk of hyperinflation is much greater than the statements of public officials would indicate.
8. All indicators barring unemployment rate have shown ptomise in recent months. But much of the growth is because of the government/Fed measures. It is very difficult to say how would the economy fare minus the stimulus.
9. It looks like we are heading into a weak, prolonged recovery
10. I'd like to be optimistic, but keep seeing the revisions.
11. Another slow down or double-dip recession awaits in 2010
12. While Wall Street is back to profits (using cheaper funds because of US guarantee), Main Street is hurting and will continue to hurt for a long time--without remedying that hurt
13. Seeing a curious blend of caution and new thinking and a scary return to many practices from only two years ago that were reckless.
14. Growth in places like Texas/Wyoming, stagnation or worse in Michigan/California/Rhode Island.
15. Underlying problems have been swept under the carpet
16. Fiscal stimulus, foreclosure prevention, accounting tricks, and inventory restocking enough to elevate GDP. But investment remains weak, debt servicing burdens rising despite low rates, and employment situation continues to deteriorate. Q2/3 should see a second wave of deleveraging and contraction.
17. Labor, GDP, stocks, savings, consumption?? How measured?
18. Data manipulations. Freight traffic and sales taxes are only reliable data left, and they are still pointing downwards. The rest of the markets are based solely on paper fluff.
19. Massive and wrenching re-orderings of the economy still lie ahead -- long term government obligations are unsustainable.
20. I'd like to say "Weak but growing"

And take a close look at chart 3, which asks about growth prospects for the next 3 years for 12 different variables.  Like most of questions in our survey, this one aims for a qualitative answer, not a specific forecast.  There were 5 answer choices for each variable: strongly increasing, increasing, stable, decreasing, and strongly decreasing.  When we average the responses together, four things had average responses near 0.4 (where 0.5 represents mere "increasing"), and neither U.S. employment not U.S. GDP per capita were included.  Those two variables had average ratings of 0.18 and 0.17 respectively, which is closer to stable than increasing.

 

Now, nobody loves the notion of "competitiveness" and Paul Krugman famously savaged it once upon a book.  But we included it in the survey because the phrase is a useful summary of the business/policy environment in the U.S. relative to the world. It strikes me as a sad commentary that zero respondents mark U.S. competitiveness to increase strongly over the next 3 years. Zero. Of the twelve things considered, competitiveness was the only one without a single high mark. Granted, the 83 respondents to this question probably had 83 different reasons (or more) to anticipate weaker relative U.S. competitiveness (and many of them are probably related to the U.S. budget deficit), but that's not very reassuring.

 

 

Comments

[CrisisMaven]

Interesting new approach, will reference in my Reference List to my economics blog with economic data series, history, bibliographies etc. for students & researchers. Currently over 200 meta sources, it will in the next days grow to over a thousand. Check it out and if you miss something, feel free to leave a comment.

[CrisisMaven]

Here's the link: http://crisismaven.wordpress.com/references/

[louis vuitton online shop]

Tim: As I wrote on my blog, Truth on the Market, I think Tyler is pretty far off base with this one. See http://www.truthonthemarket.com/2009/04/28/what-does-tyler-know-about-law-and-economics-anyway/

[GED]

Amazing one, i appreciate this work....