Long-time readers know I’ve been a long-time member of the National Association of Business Economics and have great respect for their research. Last week, they released their latest survey of members.
Overall, they have decreased their estimate of GDP growth for this year from 3.3 percent to only 2.8 percent. I have to agree that economic conditions have weakened, and a decrease is appropriate . . . unfortunately!
(Surprisingly, the impact of the tragedies in Japan appears modest, reducing second quarter GDP a mere .15 percent, while increasing it a mere .10 percent in the second half of this year.)
There was also considerable discussion about whether the recovery is sustainable. Clearly, a majority of members feel it is, which is good. Only 11 percent believe the recovery will be “subpar with severe wealth losses and onerous debt issues, inhibiting spending and lending.” My expectation is that the recovery will continue, albeit weakly, UNLESS we have a “blow-out” in the derivatives market, which will make the 11 percent crowd correct . . . unfortunately!
The third section dealt with unemployment projections. They expect “moderate improvement,” which seems optimistic to me, but I hope they are right. They predict year-end unemployment to be 8.5 percent this year and 8 percent next year. Recoveries from financial shocks are always “jobless recoveries” . . . unfortunately!