I had the opportunity to hear John Mitchell’s economic forecast at the October 19th Commercial Association of Broker’s breakfast meeting. John always does an excellent job making a boring topic interesting. There were no surprises in his presentation about the current economic situation, the gist of which was, the U.S. economy is growing, albeit at a slower rate than one would hope.
John began with a quick review of where we are:
- In the 4th year of economic expansion (hard to believe that’s true but it is)
- 4.5 million jobs below our January 2008 peak
- 4.3 million jobs above our February 2010 trough
- 73 days until the Fiscal Cliff (read my previous post if you want a quick primer on the Fiscal Cliff)
- Globally experiencing economic weakness – Europe, Brazil, China, Russia, India are all either in recession or their economies are slowing down
- In the fourth year with short term interest rates at zero
- The Congressional Budget Office and the International Monetary Fund are both warning of a U.S. recession looming within the next several months
But I didn’t go to hear John Mitchell talk about our current economic situation. I went there to hear what he thinks will happen going forward. Accurately forecasting future economic trends splits the men from the boys, which reminds me of the Yogi Berra quote: “It’s tough to make predictions especially about the future.”
Not surprisingly, John Mitchell didn’t go out on a limb making any bold predictions about our economic future. Economists as a rule are not known for being risk takers. John Mitchell believes that our economy will continue to sputter along in the 2% growth range and that inflation will stay in check at about 2% for the foreseeable future as long as the Fiscal Cliff is handled responsibly.
What was disconcerting to me was how negative his overall presentation was. John by nature is an optimist. He is always looking for a “silver lining.” Normally if he says something pessimistic he tries to sugarcoat it with some positive news. That was not the case this time. My notes are filled with downbeat statistics. The big three downers were:
- The economic recovery is growing at an historically slow rate when compared to all other economic expansions since WWII.
- The Fiscal Cliff. Congress and the president need to work together to avoid an economic crisis of their own making. If not handled properly it will throw the U.S. economy into a recession.
- Monetary Policy. The Federal Reserve is out solutions and nothing has worked. Interest rates are at historic lows, Operation Twist, and Quantitative Easing have had only modest impact on the economy.
When he got done, I had to fight the urge to give him a big hug and tell him things will get better.
Whether that is true or not will depend in large part on who we elect in November. I hold out no hope if President Obama is re-elected for another four years. I’m not sure he even acknowledges that we have a serious debt crisis that will take us down the same path that Europe is traveling if we don’t do something about it soon. Mitt Romney talks a good game. He at least says the right things but I’m skeptical he will have the courage to make the hard choices to get us back on track. Is he a statesman or just another politican saying whatever is necessary to get himself elected? I’m sure I’ve just offended both the Democrats and Republicans that read my blog. Sorry. I consider myself an equal opportunity offender.