This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Slower Growth, Stubborn Unemployment in 2013

NEW YORK ( TheStreet) -- Recent retail sales data indicate economic growth is shifting down a gear from the 2.7% pace set during the third quarter. The consensus of forecasts indicates growth slowing to below 2% in the fourth and first quarters -- my submissions to those polls were 1.7% and 1.4%, respectively.

For all of 2013, the economy will be hard pressed to accomplish the 2% growth registered this year, and unemployment only will continue falling if more adults opt out of the labor market or settle for part-time work.

This forecast depends on a fiscal cliff agreement that imposes only moderately higher taxes and at least some veiled attempt to curb spending.

On spending cuts, this economist is from Missouri - a state that will be among the hardest hit by the defense cuts resulting from the "fiscal cliff." President Obama and allies in Congress simply won't accept that entitlement spending is out of control. Such cognitive dissonance colors long-term prospects, even as revealed by forecasts coming from Democratic economists.

Should the president succeed in obtaining an immediate $100 billion to $150 billion in new taxes, and Republicans obtain a similar-sized quick cut in spending, brace for a recession. With so many folks already unemployed or underemployed, it could be difficult to lift the economy off the mat again, even with trillion-dollar deficits.

It is important to recognize stronger third-quarter growth was on the back of inventory build and surging exports, whereas consumer spending, the big locomotive, slowed markedly. Inventory investments must moderate with the slower pace of consumer spending, and exports have already slowed considerably, thanks to policy dysfunctions and recession in Europe.

Consumers are hesitant to do more than replace wearing big ticket items and indulge in moderate outlays on nondurables like clothing, as worries about the fiscal cliff loom. More importantly, years of falling real wages constrain consumer buying power -- savings share of personal income is already very low.

Jobs lost to Chinese and other Asian competition in manufacturing continue to be replaced by lower paying positions in service activities and in what new manufacturing emerges, and the failure to replace many jobs altogether pins down the percentage of adults working and wages.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $109.27 -1.00%
FB $88.26 0.12%
GOOG $600.70 -0.92%
TSLA $241.93 -1.48%
YHOO $31.58 -2.95%

Markets

Chart of I:DJI
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASDAQ 4,683.9190 -49.5780 -1.05%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs