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Direckshun 12-26-2012 10:37 AM

Predict the 2013 Economy
 
Pretty interesting observations from Bill McBride.

I'm pretty sure there will be a fiscal cliff agreement in late January, early February, as I've said a couple times in the Fiscal Cliff megathread. I'm fairly certain that fiscal cliff agreement will slow the economy down, along with the economic implosions in Greece and Spain. But I'm certain that agreement will take the debt limit off the table in 2013.

The absolute best thing going is the housing market. It almost doesn't matter what our policy is (so long as it isn't debt limit suicide), as a sturdy housing recovery will drive the entire economy damn near by itself.

I think we're looking at slumpy but steady improvement for about six months, then as fiscal policy settles down, a strong second half of the year.

http://www.calculatedriskblog.com/20...=Google+Reader

Ten Economic Questions for 2013
by Bill McBride
on 12/24/2012 06:43:00 PM

Here are some questions I'm thinking about ...

1) US Policy: This is probably the biggest downside risk for the US economy in 2013. I assume some sort of fiscal agreement will be reached soon, but how much austerity will be included? What will happen with the Alternative Minimum Tax (AMT)? What about emergency unemployment benefits? What about extending the mortgage relief for debt forgiveness (important for short sales)?

And what about other policy in 2013 such as the "default ceiling" (aka debt ceiling)? In 2011, the threat of a US government default slowed the economy to almost a standstill for a month. Right now the White House is taking the Ronald Reagan approach (when the Democrats pulled a similar reckless stunt) and they are saying President Obama will only sign a clean debt ceiling bill. Good. Hopefully default is off the table, but you never know.

2) Economic growth: Heading into 2013 there are still significant downside risks from the European financial crisis and from U.S. fiscal policy. Will the U.S. economy grow in 2013? Or will there be another recession?

3) Employment: How many payroll jobs will be added in 2013? Will we finally see some pickup over the approximately 2 million private sector job creation rate of 2011 and 2012?

4) Unemployment Rate: The unemployment rate is still elevated at 7.7% in November. For the last two years I've been too pessimistic on the unemployment rate because I was expecting some minor bounce back in the participation rate. Instead the participation rate continued to decline. Maybe 2013 will be the year the participation rate increases a little, or at least stabilizes. Economists at the SF Fed wrote about this last week: Will the Jobless Rate Drop Take a Break?

Quote:

The recent recession was unusual in its depth and its duration. Labor market conditions have remained difficult for a long time. As a result, large numbers of discouraged workers have stopped looking for jobs. A big unknown is whether these workers will stay out of the labor force permanently or enter as the economy recovers. If these workers join the labor force, increasing participation could have a major impact on the unemployment rate in the coming years.
What will the unemployment rate be in December 2013?

5) Inflation: The Fed has made it clear they will tolerate a little more inflation, but currently the inflation rate is running below the Fed's 2% target. Will the inflation rate rise or fall in 2012?

6) Monetary Policy: Currently the Fed is planning to buy $85 billion in Treasury and agency mortgage-backed securities per month as part of the open-ended QE3. Will the Fed continue all year at this pace? Or will the Fed increase their purchase rate? Or will the Fed decrease their purchase rate, stop these purchases, or even sell some securities?

7) House Prices: It now appears house prices, as measured by the national repeat sales indexes, bottomed in early 2012? What will happen with house prices in 2013?

8) Housing Inventory: Over the last few years, we've seen a dramatic plunge in existing home inventory. Will inventory bottom in 2013?

9) Residential Investment: Residential investment (RI) picked up in 2012, with new home sales and housing starts increasing 20% or so. Note: RI is mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales. This still leaves RI at a historical low level. How much will RI increase in 2012?

10) Europe and the Euro: What will happen in Europe in 2013? Will a country leave the euro this coming year, will the euro-zone implode, or will 2013 be the bottom for the euro-zone economies?

I'm sure there are other key questions, but these are the ones I'm thinking about now.

CoMoChief 12-26-2012 10:50 AM

Worse than the 2012 economy....and 2014 will be worse than 2013 and so on.

all by design.

cosmo20002 12-26-2012 01:29 PM

Quote:

Originally Posted by CoMoChief (Post 9241739)
Worse than the 2012 economy....and 2014 will be worse than 2013 and so on.

all by design.

Considering that you've been wrong about every single thing ever, this is a positive indicator.

CoMoChief 12-26-2012 01:37 PM

Quote:

Originally Posted by cosmo20002 (Post 9241966)
Considering that you've been wrong about every single thing ever, this is a positive indicator.

What else have i been wrong about in this forum?

Direckshun 12-26-2012 01:38 PM

Quote:

Originally Posted by cosmo20002 (Post 9241966)
Considering that you've been wrong about every single thing ever, this is a positive indicator.

Heh.

CoMoChief 12-26-2012 01:48 PM

Quote:

Originally Posted by Direckshun (Post 9241985)
Heh.

Dude just about EVERY SINGLE THREAD you start in this forum is absolute BS.

Bewbies 12-26-2012 02:18 PM

According to Obama raising taxes during a recession is bad for the economy. So this year's largest tax increase in history should turn us into a juggernaut.

Ebolapox 12-26-2012 03:42 PM

my prediction? we're ****ed. we've been ****ed for a good long while, but we're still ****ed. doesn't matter who we elect/re-elect, doesn't matter what laws are passed, we're ****ed. our children are ****ed, our parents are ****ed, our grand-children are ****ed. everybody is ****ed. it's not a pretty ****ing either, it's just ****ing ridiculous. no goddamned common sense, no goddamned sense at all--just a good, solid ****ing.

AustinChief 12-26-2012 03:44 PM

Quote:

Originally Posted by cosmo20002 (Post 9241966)
Considering that you've been wrong about every single thing ever, this is a positive indicator.

Glass houses.

I have no idea what CoMo's record is like regarding accuracy but I certainly know yours.

theelusiveeightrop 12-26-2012 04:50 PM

Raising taxes and increasing entitlement spending= success in 2013

fan4ever 12-26-2012 05:38 PM

Quote:

Originally Posted by Ebolapox (Post 9242175)
my prediction? we're ****ed. we've been ****ed for a good long while, but we're still ****ed. doesn't matter who we elect/re-elect, doesn't matter what laws are passed, we're ****ed. our children are ****ed, our parents are ****ed, our grand-children are ****ed. everybody is ****ed. it's not a pretty ****ing either, it's just ****ing ridiculous. no goddamned common sense, no goddamned sense at all--just a good, solid ****ing.

Our only hope is a meteor to hit Washington during full session...and then we can start over...

HonestChieffan 12-26-2012 06:09 PM

Same as the last three years. Maybe worse for the middle class. The war on those who do well will hurt the rest even more

Direckshun 12-27-2012 12:18 PM

http://www.washingtonpost.com/blogs/...rss_ezra-klein

Why 2013 should be a good year for the U.S. economy
Posted by Neil Irwin
December 26, 2012 at 11:23 am

There is good reason to think that 2013 will be the finally be the year that the U.S. economic recovery really feels like a recovery: The biggest forces that have been holding the economy back finally seem to be subsiding.

There is a risk, of course, that new headwinds will gather to hold the economy back — but more on that on Thursday and Friday. Today, a look at why this should, by all rights, be quite a happy new year.

The recession began five years ago and ended more than three years ago. Yet some 12 million Americans are still looking for work, and many millions more would confirm that it hasn’t felt like a recovery at all. That would include the people who have seen their incomes flatline or have been drowning in mortgage debt for years on end.

The data support this impression, that the U.S. economy still hasn’t really recovered. Since the start of 2010, growth has averaged 2.2 percent, which would be just fine in normal times, but is lousy considering the starting point was a time of mass unemployment and general economic despair. The nation is poised to approach the fourth anniversary of economic recovery this summer with something approaching a $1 trillion gap between what it is capable of producing and what it is actually producing. Within that trillion dollars are the squelched dreams of millions of families who wanted a better economic life.

It will take a few years of real growth — at least 3 percent, but 4 or 5 percent shouldn’t be too much to ask — to change that dynamic. And the stars are aligning for 2013 to be the beginning of a period of above-par growth. Let’s consider the things that have been holding things back, and why those headwinds may finally be fading:

Housing. The biggest cramp the economy these last few years has been the housing sector, with sales near historic lows for half a decade. At first, this was a necessary adjustment, as the overbuilding of homes during the 2000-2006 boom was worked off. But we’re far beyond that point now, with, if anything, significant under-building of homes in recent years relative to demographic trends. That’s true even when one adjusts for the lower-than-normal “household formation” during the recession and its aftermath (think young college graduates living in their parents’ basement instead of getting an apartment).

One day, this mismatch—too few houses being built relative to the number of people who need a place to live—will be resolved, and that day seems to be today. The number of housing units started, an 861,000 annual rate in November, is up 22 percent from a year earlier and up a whopping 58 percent from two years earlier. And there is plenty of reason to think that the upswing will continue. That 861,000 number is still well below many estimates of the longer-term rate of household formation, which put in the 1.2 million ballpark. That means there is plenty more room for housing construction activity to grow, giving a boost to the economy.

One more positive: So far, the increase in construction jobs has not matched the increase in home-building activity. In fact, for the year that ended in November, the number of residential construction jobs actually fell by 5,000. It is a bit of a mystery as to why, but one sure thing is that it can’t go on forever; if building activity keeps rising, construction companies will need more workers. And this is low-hanging fruit for helping the labor market; the unemployment rate among construction and extraction workers was a high 12.9 percent in November. Taking construction workers who are currently sitting idle and putting them to work building new houses and apartment buildings that a growing population needs is just what this economy needs.

Household debt. American consumers, we have often heard, have been weighed down the debts they incurred during the boom years — credit card bills, student loans and, especially, burdensome home mortgages. A widespread theory is that consumer spending will never really rebound until Americans have dug themselves out from under those debts.

The good news is that, through a combination of their own efforts to save money, low-interest rate policies from the Federal Reserve and defaults and foreclosures, Americans seem to be far along their deleveraging path.

The ratio of household debt to GDP has fallen from a peak of 98 percent at the start of 2009 to 81 percent in the third quarter, about the 2003 level.

The cost of servicing that debt is down even more because of low interest rates; the ratio of household debt servicing costs to after-tax personal income was down to 10.6 percent in the third quarter, near its lowest levels on records. The Fed’s policy actions have brought down rates on credit cards and auto loans, and more and more people are able to refinance their mortgages as home prices rise.

Americans’ household balance sheets are looking as good as they have in a decade, which means that as 2013 begins, debt overhang no longer looks like a dark cloud over the economy.

State and local governments. Among the persistent drags on the economy through this weak recovery have been state and municipality budget woes. State and local governments have slashed spending and jobs, essentially counteracting federal stimulus efforts with fiscal anti-stimulus measures of their own.

From 2000 to 2008, state and local governments added an average of 226,000 jobs a year. But since 2008, the sector has cut an average of 154,000 a year, as states struggled to balance their shrinking budgets hampered by lower tax revenues and higher spending on social welfare needs.

But they may finally be through with that adjustment process. With tax revenues climbing and major budget-cutting already completed, state and local government employment seemed to have bottomed out in May, and has been on a gentle upswing since (adding a total of 48,000 jobs in the ensuing six months). Don’t look for the this sector to be a major driver of hiring, but by ceasing to be a negative, it could stoke the potential for 2013 to be a good year.

Dayze 12-27-2012 06:52 PM

Quote:

Originally Posted by Ebolapox (Post 9242175)
my prediction? we're ****ed. we've been ****ed for a good long while, but we're still ****ed. doesn't matter who we elect/re-elect, doesn't matter what laws are passed, we're ****ed. our children are ****ed, our parents are ****ed, our grand-children are ****ed. everybody is ****ed. it's not a pretty ****ing either, it's just ****ing ridiculous. no goddamned common sense, no goddamned sense at all--just a good, solid ****ing.

yup

Bwana 12-27-2012 07:24 PM

http://images4.wikia.nocookie.net/__...nkey_flush.gif


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