The economy will not recover this year.

[makattak]

Ok, I hate making predictions, but that's pretty much the only way people will pay attention.

However, ceteris paribus there is no reason to see any recovery this year beyond small growth in existing business.

What drives a recovery after a recession is new businesses taking over the assets and resources (e.g. workers) of failed business.

In a recession, the price of starting a new business drastically drops as there are great numbers of failed businesses leaving machinery, land, retail space, and workers unutilized. (In economics, this is part of Tobin's q or the Q theory of investment.)

New businesses (or existing ones) will not need to build new machinery or new warehouses or many other things, but can take over existing, unutilized resources. This is what spurs the rapid growth that generally follows an economic downturn. The economy is currently recovering, but only slowly. Historically this is unusual.

The reason for this is businesses have a virtual certainty that taxes will increase next year. If nothing changes, taxes go up as the Bush tax cuts expire. This means that when a business invests this year (which necessarily means they are forgoing present consumption for future consumption), they are passing up enjoying their wealth now for greater (expected) wealth in the future when these investments pay off.

Of course, because of the virtual certainty of increased taxes, that payoff is smaller. Now, add to that certainty there is the uncertainty of what further damage will be done to their business by Washington (regulations, health care, cap and trade, etc...).

Uncertainty kills business as much as certainty about negative consequences. For this reason, few forward thinking businessman will invest this year because their return will be smaller. The democrat policies will kill all marginal investments, leading to the slow, painful recovery we see now.

Ironically, to encourage growth, the Democrats may not even have to cut taxes. Simply making the Bush tax cuts permanent (or extending them) should provide significant incentives.

And, as much as I would enjoy the irony of Democrats adopting yet another Bush policy they decried, that strategy is inconceivable to them. Thus, we will continue with this "jobless recovery."

[Northwoods]

Ayup.

Pretty much everything I've seen points to that.  Gazillions of contractor reqs opened and then closed without ever actually interviewing, nevermind hiring anyone.  Even that has slowly declined to where now I don't get more than a small handful of req's to even apply for.

[Standing Wolf]

Aw, heck. The current occupant of the White House talked about jobs just the other evening. What more can you expect?

[Monkeyleg]

I guess Obama isn't listening to the Democrat-elected director of the Congressional Budget Office, who has some dire predictions. Column is here.

[Headless Thompson Gunner]

But GDP is up 6% this quarter!  That's two consecutive quarters of growth, so Barry and the Democrats can officially claim the recession is over.

What they won't tell you is that the growth is due entirely to government spending.  Unsustainable government spending, at that.

And has anybody been watching the stock market these past two weeks?  Seems folks are getting a might jittery.  

[Monkeyleg]

Every time Obama opens his mouth the market takes a dive. They should have kept him on the beach in Hawaii.

[makattak]

Every time Obama opens his mouth the market takes a dive. They should have kept him on the beach in Hawaii.

There's scholarship that the market drops whenever Congress is in session. (Ok, not necessarily drops, but won't grow.) It grows when Congress is not in session.

There's even an investment firm dedicated to exploiting that fact to make it's money.

[drewtam]

Makattak, can you define "recover" or "recovery" in your predictions?

[makattak]

Makattak, can you define "recover" or "recovery" in your predictions?

Anemic growth. As I noted, following a recession, the economy tends to make large gains in growth (average just over 4%).

Our economy will not reach that. We are likely to grow at less than 2%.

[Gowen]

The DOW seems to drop every time obama makes a speech, short the market on those days.

[Headless Thompson Gunner]

Except that since March the market is way up, despite Obama's near constant speechifying.  If you shorted every time he made a speech, you'd be broke.

These past two weeks have been one of the only periods of significant declines since the crash last year.  And this despite numerous pieces of good news.  It's worth taking note.

[Standing Wolf]

These past two weeks have been one of the only periods of significant declines since the crash last year.

I'll buy that; I also have to ask, however, whether the NASDAQ and DJIA indices have risen by more than the value the dollar has lost. If you think dollars are of constant value, I've got some lovely oceanfront property in Idaho for you.

[Headless Thompson Gunner]

There aren't any reliable ways to measure the value of the dollar.  All of the usual yardsticks (other currencies, commodities, stocks, consumer goods, you name it) vary just as much or more.

Even assuming that a change in dollar value is the explanation, you still have to account for why the dollar gained so much value lately.  All you've don is shift the question from "why are stocks suddenly worth less" to "why are dollars suddenly worth more".  You're no closer to having an explanation for what happened.

Something is happening, whether it be with the dollar or with stocks.  I allow for the possibility of dollar changes, but I really doubt that's the root of the issue.