Kudlow vs. Abelson: An Analysis

We can always find a millionaire to shovel all the coal.
-- Tom Waits, "Clap Hands"

OK, I'm starting to get angry. It seems like everybody is saying this is the weakest economic recovery ever.

Case in point: Alan Abelson of Barron's points out that economist Paul Kasriel wrote a critical article on Larry Kudlow's piece last week in The Wall Street Journal. Kudlow was citing the evidence that the economy is doing great. Among Kudlow's evidence was the following:

• after-tax corporate profits are up 19.5%


• inflation-adjusted consumer spending is up 3.6%


• capital-goods investment by businesses is up 13.9%

And so on.

According to Abelson, Kasriel points out that the jobless rate has showed a much slower decline than the usual average postwar recovery. The average recovery decline in the jobless rate is 19.8%, notes Kasriel, as opposed to this recovery's 2.4%. Kasriel also says that the average postwar expansion rate in GDP has been 5%, as opposed to the 3.4% expansion in this recovery pointed out by Kudlow.

Apples and Oranges

Well, Kasriel is right. But I'm afraid he would get an F in Economics 101 for his analysis. Why can't he mention other things that make this recovery different from every other recovery?

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James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund. At the time of publication, Altucher had no positions in any of the stocks mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback and invites you to send it to [e-mail].

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