Walter Mencken 10 a.m., July 23
"Healthy" Expansion? For Whom?
The National Association for Business Economics will release today a poll of economists who say a recovery is firmly on track, although there will be no drop in unemployment below 9 percent for another year. Lynn Reaser, chief economist at Point Loma Nazarene University, and president of the NABE, says "We see a healthy expansion," although there will be bumps along the way. She is an excellent economist, but should not have used the word "healthy." The NABE prediction is an oxymoron. There can be no firm or healthy expansion if unemployment remains at 9 percent, particularly since consumer spending is 70 percent of the economy. New York Times pointed out in a front page story Sunday that 6.3 million people have been out of work for longer than six months. Even in the megrims of the mid-70s, that figure was below 2 million. In the deep recessions of the early 1980s it was below 3 million. The NABE sees jobs growing at 103,000 a month in 2010. That is optimistic, but even if it eventuates, still very weak. The NABE economists see consumer spending rising 2.2% this year, according to the A.P. The economists expect the stock market, as measured by the Standard & Poor's 500, to rise 23 percent over the next two years. But it is almost impossible to say stocks and commodities WON'T move up when the Federal Reserve is lending money at around zero percent interest rates to banks. These markets are increasingly disconnected from economic reality. They are driven by the liquidity. Expectations of continued liquidity, or essentially free money, seem to be driving the NABE economists, too.
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