Consumer confidence has strengthened as the prospects of a Great Depression 2.0 have seemingly subsided. But it’s out of the frying pan and into the fire thanks to rising unemployment. And maybe that explains these plunging consumer confidence numbers from Rasmussen:
I will admit that when I read the headline “China Looks for Big Cuts in Emissions” in the WSJ today, I thought the country had radically shifted policy and was joining the cap-and-trade crowd. My bad. The Reuters hed is more accurate: “China tells rich nations to cut emissions by 40 percent.” (Read the story.) I think it is more likely that the U.S. will eventually slap a carbon emissions tafiff on Chinese goods than it will accede to such demands, not that I think the former is too likely either.
This ugly news from the Congressional Budget Office:
In the Congressional Budget Office’s (CBO’s) judgment, the economy will stop contracting and resume growing during the second half of this year, but the hardships caused by the recession will persist for some time. The growth in output later this year and next year is likely to be sufficiently weak that the unemployment rate will probably continue to rise into the second half of next year and peak above 10 percent. Economic growth over time will ultimately bring the unemployment rate back down to the neighborhood of 5 percent seen before this downturn began, but that process is likely to take several years.
I’ve talked to loads of investors, pro and amateur, who think the game is up. They think the American economy is doomed to downshift into a permanent slow-growth mode. Massive budget deficits, more regulation, more taxes. My standard reply points out that global current, debt and equity investors would punish, sooner rather than later, any nation that follows such a course. The financial vigilantes would prevail in the end.
Not in the US, Europe or Japan, says economic analyst Ed Yardeni:
The “Old World” economies (the US, the UK, the Eurozone, and Japan) are likely to remain challenged by the unwinding of the financial excesses of recent years. They all seem to have lost their entrepreneurial spirit. They all have large government deficits and aging populations. The emerging “New World” economies, particularly in Asia and Latin America, seem to be more dynamic. They certainly have tremendous growth potential by simply catching up to the standard of living of the Old World. Standards of living may grow more slowly than in the past for the roughly one billion people in the Old World as a result of tougher credit conditions.
The government’s nastier stress test scenario looked for U.S. unemployment to rise to 10.3 percent. Today’s weekly jobless claims report (631,000) is another indication that we are well on our way to that level. As the econ team at JPMorgan sees things: