Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:GDP Stink

GDP Stink

Written by Economist, Global Futurist, and Keynote Speaker Jeff Thredgold, CSP, President, Thredgold Economic Associates

American economic pain was widespread during 2008’s final quarter, with the overall economy contracting at a 3.8% real (after inflation) annual rate.  The economy’s decline was the sharpest since the first quarter of 1982-a period of 26 years. GDP, or gross domestic product, is the broadest and most complete measure of the nation’s overall economic activity.

On the surface, the 3.8% annual rate of shrinkage was “good” news, since the consensus view of forecasting economists was for a 5.0% – 5.5% real annual rate of decline.  However, the lesser rate of decline occurred for the wrong reason, one which actually suggests that the U.S. economy will be weaker in 2009’s first half than was the prior view (see Inventory Blip below).

Economist and Keynote Speaker Jeff Thredgold’s Weekly Column: Hammered!

Written by Keynote Speaker, Economist, and International Speaker Jeff Thredgold, CSP, President, Thredgold Economic Associates

The December employment report continued the losing streak in place throughout 2008, with the net loss of another 524,000 jobs, matching the consensus view of economists.  Adding insult to injury were revisions to October and November employment data, noting the loss of an additional 154,000 jobs during those months.

Calendar year 2008?  A net loss of nearly 2.6 million jobs, the worst performance since 1945…a period of 63 years.

Equally disconcerting was the spike in the nation’s unemployment rate from a revised 6.8% in November to a 16-year high of 7.2% in December.
us employment growth

Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:Keeping Score

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates

Given the highly emotional and extremely volatile nature of the domestic economy during the past year, I thought I might take a look back at the accurate forecasts, as well as the blunders, which took place on our end…

As noted before, forecasting the future is not easy. No one knows what is going to happen, what forces will be at play, and how politicians, the media, corporate executives, investors…and consumers will respond.  Economists are wrong more often than we are right, for which we receive considerable and well-deserved abuse.  As a former banking colleague of mine noted, economics should get the respect it deserves alongside all the other occult sciences.

Economists provide forecasts of the future not because we know what is going to happen.  We provide forecasts because we are asked to do so…

…a big difference!

The nature of my economic forecasting and professional speaking is really geared toward helping people understand the crazy behavior of the economy and financial markets. It involves as much correcting bad information that people hear from anywhere and everywhere as anything else.

Our latest book, econAmerica, Why the American Economy is Alive and Well…and What That Means to Your Wallet, released in July 2007 by major publisher Wiley & Sons, is a 20-30 year look into the future of the American economy.  The book supports my self description of being “realistic and optimistic” as a seasoned (meaning old and increasingly gray) economist. econAmerica combines with our weekly newsletter, the Tea Leaf (now beginning its 34th year), to hopefully provide value to our readers.

I don’t make crazy, wild, or bizarre economic forecasts, each intended to draw the attention of the national media. Many highly arrogant economic and financial market forecasters make a nice living doing this, and in my view give forecasting a bad name.

Career Emphasis

Earlier in my career, while chief economist of one of the nation’s dozen largest banks, I spent many years traveling to New York City every month to appear on CNBC-TV and/or CNN, interview with national newspapers, etc.  I have been to mid-town Manhattan more times than I care to remember. While I am a member of three select national economic forecasting panels, I couldn’t care less about any more national TV.

My focus is on being the best speaker and writer I can be regarding economic and financial developments…and on being one of the best in the business. I spoke to roughly 100 different audiences across all industries during 2008, ranging in size from 8 people to 8,000. Particularly gratifying was the fact that roughly half of these events were repeat business.

Looking back, we made perhaps six major forecasts regarding major economic and financial sectors. Four of these forecasts turned out to be anywhere from accurate to highly accurate. Two were blunders, for which I apologize.

Oil Prices

Our Tea Leaf issue dated July 2, 2008 was entitled “Bubbles & Monster Money.” It discussed my view that an enormous amount of money around the world aggressively goes in search of the next best deal.  This money pushed the Nasdaq over 5000 very early in this decade, then pushed home and commercial real estate prices to absurd levels between 2003 and 2006, and then pushed oil and other commodity prices to unsustainable levels from 2006 through mid-2008.

We noted in the July 2 Tea Leaf, when oil was at its peak near $145 per barrel, that “In my mind, oil and other commodity prices could decline sharply during the next year.”  More than a few forecasts at that time by market experts saw oil quickly going to $200 per barrel, or more. As it turned out, oil plunged slightly more than $100 per barrel during the next 3-4 months.

The Dollar

During speaking presentations throughout 2008’s first half, I was suggesting to audiences—when “the dollar” question arose—that I thought it would strengthen later in the year.  Our Tea Leaf issue dated July 16, 2008, entitled “Dollar” stated, “My outlook for the U.S. dollar suggests some strengthening, especially versus the euro, will occur during the next year,” with four primary reasons identified.  As you will recall, the euro reached $1.61 in value in July, only to fall to roughly $1.28 a few months later.  It is currently worth $1.37.

The Almighty Congress

In our view, there was little uncertainty during the past year about 2009 Congressional control. We noted in our Tea Leaf dated April 16, 2008, entitled “Handwriting on the Wall,” that while the Presidential race was wide open, two other factors were not.  We noted “…the Democrats are almost certain to strengthen their control in the U.S. House of Representatives” and “…the Democrats are highly likely to add to their majority in the U.S. Senate.” As you are aware, Democrats did strengthen their numbers considerably in both the House and the Senate.

Long-Term Interest Rates

Every speaking engagement during 2008 had a forecast of interest rates.  Every audience was given my view—contrasting with the consensus view of economists—that long-term interest rates would be declining in 2008’s final few months.  As you are no doubt aware, long-term interest rates, including mortgage rates and the yields on U.S. Treasury Notes and Bonds, fell during the past 4-8 weeks to the lowest levels in 50 years.

U.S. Recession

Maybe I should have ended this piece already.  A number of high profile economists were suggesting in late 2007 that a serious recession was imminent or already underway. Nouriel Roubini of RGE Monitor comes to mind.

Other highly vocal economists, including Larry Kudlow of CNBC-TV and Brian Wesbury of First Trust Advisors near Chicago, were adamant as recently as early fall 2008 that a U.S. recession would be avoided…whoops

I was not one of the early recession forecasters (for which I again apologize), suggesting in our Tea Leaf of December 5, 2007 entitled “Outlook 2008” that recession in 2008 was a 30%-40% probability. The CEO of a major banking client of ours bet me lunch in September 2007 that we would be in recession before the 2008 elections took place. I thought we might technically avoid one.  Harris, I owe you lunch.

We suggested in our March 19 Tea Leaf issue that “a mild recession seems underway.” I suggested in our “Bumps in the Road” Tea Leaf of April 23, 2008 that the emerging consensus view of a modest and short-lived recession in 2008, to be followed by growth later in 2008 was, in my view, “too optimistic.”

Somewhat better was our call as early as the May 7, 2008 Tea Leaf that the National Bureau of Economic Research, the official scorekeeper of the U.S. economy, could ultimately report that “…a U.S. recession formally began in December 2007 or January 2008, with the end date still undefined.”  The group declared on December 1, 2008 that the recession officially began in December 2007.

Global Recession

Not so good here either…I thought as recently as the summer of 2008 that the global economy would retain modest growth.  We acknowledged later that the global economy was in the tank as well, with the U.S., Europe, and Japan in simultaneous recession for the first time since WWII.

Forecasting

My thanks to our many thousands of readers.  I again ask your indulgence for the forecasting mistakes I will make in 2009.  Maybe we will get a few right as well.  Studying the economy is fascinating and frustrating at the same time.

I will stick with it.  I love it.  I’m probably too old to get a real job.

Reprinted with permission from the “Tea Leaf” by Jeff Thredgold. Copyright, 2008, Thredgold Economic Associates, LLC. To subscribe to Jeff’s free weekly email update, visit http://www.thredgold.com.”

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Economist and Keynote Speaker Jeff Thredgold’s Weekly Column: I’ve Loved You So Long

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates One of the painful realities of life as an economist and professional speaker is that the subject matter of economics is typically viewed (with good reason!) by the general public as confusing, intimidating, and boring. As a result, trying to present weekly economic and financial information with an unusual twist can occasionally be a most welcome change. Warning!! This week’s Tea Leaf is my semi-annual economic, financial, and political update…using today’s current movie titles. My sincere apology in advance to anyone I might offend. Finally, the end of 2008, a year that should be placed in QUARANTINE, never to be visited again.

President Obama

The New Year kicks off with a new President entering the STATE OF PLAY. Voters of all persuasions will look to see if we collectively LET THE RIGHT ONE IN. Many hope the new President will not surround himself with YES M(E)N and women, but will value alternative points of view. Such an issue seems to have been a problem in the Bush Administration, one now well into its TWILIGHT time. Millions of Obama supporters admire the ROLE MODEL he projects, contrasting it with the DEFIANCE of NOTORIOUS Illinois Governor Blagojevich. The Governor’s alleged BODY OF LIES about “pay to play” corruption casts major DOUBT about his ability to survive. President-Elect Obama strongly suggests his soon-to-be-announced nearly $1 trillion stimulus program will help the U.S. economy be FOREVER STRONG. He also suggests that irresponsible earmarks, a.k.a. extravagant and ridiculous pork barrel spending, will not be tolerated in the package… …don’t hold your breath. The spend-happy Congress will MILK the new stimulus program for all they can. Congressional leaders will make it clear that they run the show, and simply don’t view Obama as the CHANGELING some would like to see. Keep your eye on this “pork” issue as to the nature of the unfolding Obama Administration.

The American Consumer

The just concluded weak Holiday shopping season was NOTHING LIKE THE HOLIDAYS of the prior FOUR CHRISTMASES. While some retailers had reasonable sales totals, too many stores and malls looked like GHOST TOWNs

.

Government Stimulus

The U.S. economy is still negatively impacted by THE DAY THE EARTH STOOD STILL…September 18, 2008…when U.S. Treasury Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke announced that the sky was falling. Perhaps THE TALE OF DESPE(ration) they conveyed was a bit too much. U.S. employment has fallen like a rock since that time. THE CURIOUS CASE OF (HENRY PAULSON) is one that illustrates that the skills needed to be CEO of Goldman Sachs in prior years don’t necessarily translate into those required to have great credibility in the nation’s capital. For him, January 20 can’t come too soon. The $700 billion Troubled Asset Relief Program (TARP) has joined trillions of dollars of other economic stimulus and financial market support programs viewed as necessary. While much of this money will ultimately be returned to the taxpayer, a GOOD share will ultimately burden THE UNBORN with a higher level of national debt.

The Big 3

General Motors, Chrysler, and Ford will likely be permanent fixtures in the nation’s capital, hands frequently extended for bailout funds from the more supportive Obama Administration. They will check their CADILLAC RECORDS, GRAN TORINO data, and TRANSPORTER 3 info for places to trim costs. BOLT makers and other automotive parts suppliers will cross their collective fingers for such continuing financial support. Meanwhile the United Auto Workers (UAW), whose average wage is 68% higher than the average U.S. manufacturing worker, will likely fudge on prior suggestions of wage givebacks, with the support of the extremely liberal Congressional leadership. This UAW struggle will be another key as to the nature of the Obama Administration.

$50 Billion Up in Smoke?

Adding to global anxiety is the unfolding of perhaps the greatest Ponzi scheme in history. Long-time money manager Bernard Madoff’s alleged trading corruption now has thousands of investors, from YONKERS JOE to PAUL BLART: MALL COP to some in AUSTRALIA, wondering whether they will ever see even a hint of their money again. Fortunately, the list does not include MARLEY & ME (sorry). Many Madoff investors with an almost RELIGIOUS marvel at his now-phony trading results will eventually tell BEDTIME STORIES of the SEVEN POUNDS of gold…and other considerable wealth…they used to own. Many will find a QUANTUM OF SOLACE in eventually seeing this SLUMDOG MILLIONAIRE as THE BOY IN THE STRIPED PAJAMAS at one of the nation’s many prisons. He no doubt wishes he could have ESCAPE(d) 2 AFRICA some time ago.

The Middle East

The REVOLUTIONARY ROAD in Iran is likely to change as oil revenue plunges. Pro-Western youth, dealing with extremely limited job prospects, could eventually mean the end of Iranian President Ahmadinejad (say that three times quickly). The new WAR ZONE inside the Gaza Strip and near the land of GOMORRAH involving Israel and Hamas is unfortunate, with more loss of life and human misery to come. The Israelis will maintain an EAGLE EYE as to actions of other long-time enemies in the volatile region.

The American Economy

The worst American economy since before the days of FROST/NIXON will remain in place in coming months. VALKYRIE and other eight- and four-letter words to describe limited job prospects will be prevalent in coming months. The deleveraging of the enormous financial “house of cards” built up in recent years has been extremely painful. More pain is coming. However, THE READER of constant negativity by the national media could soon be surprised with a more positive tone. A Business Week or Newsweek cover story entitled “What a Great Time to Buy a Home” or “Today’s Great Values in Stocks” would be a most welcome change. Modest U.S. economic growth will return, most likely later in the year. What is likely to be the longest recession since the Great Depression will end. THE SPIRIT of America is NOT EASILY BROKEN.

Reprinted with permission from the “Tea Leaf” by Jeff Thredgold. Copyright, 2008, Thredgold Economic Associates, LLC.

To subscribe to Jeff’s free weekly email update, visit http://www.thredgold.com.”

Visit Economist, Global Futurist, and Keynote Speaker Jeff Thredgold web page to learn more about his programs. To book Economist, Global Futurist, and Keynote Speaker Jeff Thredgold contact FIVE STAR Business Speakers at 913.648.6480.

Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:Economist and Keynote Speaker Jeff Thredgold’s Weekly Column: JOB UGLY

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates

Monthly employment data released by the Bureau of Labor Statistics can be viewed at times as better than expected, in line with expectations, or worse than expected. On rare occasions it is just plain ugly, as was the November data released on December 5.

• The U.S. economy lost an estimated 533,000 jobs during November, the worst monthly performance in 34 years
• Previously reported employment losses in September and October were revised higher (meaning worse) by another 199,000 jobs
• The nation’s unemployment rate rose to 6.7% in November, the highest level in 15 years
• More than 10.3 million Americans were unemployed in November, the highest total in 25 years
• Reported job losses totaling more than 1.9 million during 2008’s first 11 months exceed total job losses during the prior recession in 2001
• Job losses to be reported for December could be just as bad as in November
• Total job losses of 2.25-2.50 million during 2008 could be the worst year ever

The 533,000 reported employment decline during November was nearly 200,000 more than expected. Major downward revisions to the two prior months simply added insult to injury.

Economic Speaker, Economist, Global Economist Jeff Thredgold

Across the Board

Job losses were standard fare across the broad U.S. economy in November. The nation’s embattled goods production sector got hammered, with a loss of another 163,000 jobs. The manufacturing sector lost another 85,000 jobs, while the construction sector lost another 82,000 positions.

The nation’s service-providing sector, which accounts for 85% of all American employment, lost 370,000 jobs during the month. Without combing through musty and dusty historical data, I suspect few, if any, months have EVER been worse for the services sector.

Professional & business services lost 136,000 jobs during the month, while retail trade lost 91,000 jobs. The leisure & hospitality sector lost 76,000 positions. Better news saw the education & health services sector add 52,000 jobs, while government added 7,000 new positions, primarily in local education.

Wrong Reason

Economic Speaker, Economist, Global Economist Jeff Thredgold

On the surface, the rise in the unemployment rate to 6.7% in November, versus 6.5% in October, was good news. After all, the consensus view was for the rate to move to 6.8%. However, the rate rose less than expected because an estimated 422,000 people (net change) left the labor force during November, and were no longer considered unemployed. Without that factor, the unemployment rate would have been very close to 7.0%.

An aside: Major revisions to formerly announced economic data raise havoc with the long-term health of economists. I’m too old to get a real job.

Rising Wages

Better news saw the average hourly wage rise a greater-than-expected 0.4% (seven cents) to $18.30 hourly. The 3.7% rise of the past 12 months matches an identical rise in the Consumer Price Index for the most recent 12-month period.

The gain in wages in coming months, while likely to slow slightly, should soon surpass the rise in consumer inflation. The plunge in oil and other commodity prices should ultimately see the CPI rise 2.0%, or less, during 2008. As recently as late last summer, the 12-month rise was approaching 6.0%.

A Long Recession

We have suggested frequently in recent months that the National Bureau of Economic Research (NBER) would soon announce that a recession “officially” began around the end of 2007 or early in 2008. They finally made that call.

The Business Cycle Dating Committee of the NBER, the “official scorekeeper” of the U.S. economy, announced on December 1, 2008 that a peak in economic activity occurred in the U.S. economy in December 2007. As a result, the current U.S. recession officially began in December 2007.

The national media typically describes a recession as two consecutive quarters of declining GDP. According to the NBER, however, a recession “is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”

The current recession, now in its 13th month, is likely to be the longest since the Great Depression. The current recession already exceeds the duration of 8-month recessions during July 1990 to March 1991 and March 2001 to November 2001.

Consensus estimates of economists in recent weeks suggested a return to modest, but positive, U.S. economic growth was likely during 2009’s second half. Such a development would see the current recession last 18-20 months. However, the severity of employment losses announced on December 5, combined with highly anxious domestic and global credit markets, suggest many forecasts of economic recovery could be stretched out by a quarter or two.

One More Time

Greater-than-expected job losses during November, combined with major upward revisions to previously announced job losses in September and October, have also heightened the odds that a tenth and perhaps final interest rate cut by the Federal Reserve could occur on or before December 16, 2008. The Fed’s critical federal funds rate is already at a 50-year low of 1.00%. The Fed could move to 0.50%, or even 0.25%, on December 16.

Direct Correlation?

Take a gander at the monthly employment chart. Note the severity of job losses between September and November, as compared to prior months.

In my mind there is a direct correlation between much uglier employment losses of the past three months and the dramatic announcement and warning by U.S. Treasury Secretary Paulson and Federal Reserve Chair Bernanke over the weekend of Friday, September 18 to Sunday, September 20 that “the sky was falling.”

As you will recall, this was the time when the Treasury Secretary first requested $700,000,000,000 to buy “toxic” real estate securities from the portfolios of commercial and investment banks to help stabilize the economy. This was the time when financial market stresses that were primarily a Wall Street problem up until then suddenly became a Main Street issue as well.

To their defense, financial markets in prior weeks were dealing with one failure or near failure of massive financial firms after another…Freddie Mac, Fannie Mae, AIG, and Lehman Brothers come to mind. Whether the dramatic announcements in mid-September of Secretary Paulson and Chairman Bernanke were too emotional, too scary, and simply too much will ultimately be left to the historians…

Reprinted with permission from the “Tea Leaf” by Jeff Thredgold. Copyright, 2008, Thredgold Economic Associates, LLC. To subscribe to Jeff’s free weekly email update, visit http://www.thredgold.com.”

Visit Economist, Global Futurist, and Keynote Speaker Jeff Thredgold web page to learn more about his programs.

To book Economist, Global Futurist, and Keynote Speaker Jeff Thredgold contact FIVE STAR Business Speakers at 913.648.6480.

Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:Economist and Keynote Speaker Jeff Thredgold’s Weekly Column: Outlook 2009

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates

The American Economy

…the recession continues
Domestic and global financial sector paranoia has contributed to major weakness within the U.S. economy.  Enormous investment and lending losses have sharply curtailed the availability of credit.

Gross Domestic Product, GDP, Real GDP

Such financial sector weakness has led to creative and extremely costly government proposals to stabilize financial markets.  These factors, combined with prior excesses in new home construction and existing home price appreciation, led to the current period of recession.

The official “scorekeeper” of the U.S. economy, the National Bureau of Economic Research, had remained silent in regard to recession…until this week.  They announced on Monday that a U.S. recession officially began in December 2007.

Budget Deficits

…off the charts

The combination of serious U.S. recession, enormous war spending, one financial stabilization program after another, and Congressional economic stimulus spending could see the fiscal year (FY) 2009 deficit, which began on October 1, 2008, easily exceed $1 trillion.  The budget deficit for FY 2008 was $455 billion, also a record. Note, however, that much of the Government’s investment into major financial institutions will be returned to taxpayers in coming years as financial markets (hopefully) return to some level of normalcy.

Unemployment

…to move higher

Unemployment Rate, U.S. Unemployment Rate

The nation’s jobless rate reached 6.5% in October, a 14-year high. It could reach, and possibly exceed, 7.5% during 2009. By comparison, the jobless rate averaged 4.6% in both 2006 and 2007.

U.S. employment has declined for 10 consecutive months, with nearly 1.2 million fewer jobs today than a year ago.  However, longer-term labor shortages, especially for skilled workers, will remain center stage for years to come.

Inflation

…to move lower
The sharp decline in oil and other commodity prices of recent months, should it continue or simply stabilize, will help unwind much of the inflation pressures that pushed inflation (the CPI) to a 16-year high of 4.1% in 2007. Most forecasters expect the CPI to rise roughly 2.0% in 2008, with a slightly smaller increase expected next year. Note that there are as many concerns about deflation during the next few years as about inflation.

The Federal Reserve

…just plain aggressive
The Fed has been a major player in numerous financial stabilization programs announced during the past 16

U.S. Consumer Price Index, CPI, Consumer Price Index

months. As noted above, the sharp decline in inflation pressures provides the Fed “cover” to aggressively use its balance sheet to improve financial flows.

The Fed’s critical federal funds rate, arguably the most important of all interest rates, has been at a 50-year low of 1.00% since late October.  Another cut to below 1.00% is likely no later than December 16.

Solid evidence of U.S. financial stabilization and a resumption of modest economic growth during 2009’s second half—the current consensus view of economists—will lead financial markets to expect a minimal reversal of Fed policy late in the year or early in 2010.

Gasoline Prices

…like cutting taxes
Need a bit of “good” economic news?  The plunge in gasoline prices from a high of roughly $4.25 per gallon in early July to around $1.65-$1.85 now is the equivalent of a $250 billion tax cut for American consumers.  One concern is that prices could go too low…and put prior initiatives regarding developing alternative sources of energy on the “back burner.”

The Global Economy

…more slowing expected
Five years of powerful global economic performance gave way to major slowing during 2008.  A global recession during 2009 is likely.

As in the U.S., global financial markets and major financial market players have been decimated by a loss of confidence…the most crucial component of the lending and investing process. If you don’t have confidence in the firms you lend money to, you simply don’t do it…just ask Bear Stearns and Lehman Brothers, now deceased.

Better news? Declines in energy, commodity, and many food costs of recent months have been good news for hundreds of millions of the global poor.

Asian economies are dealing with their own exposure to global financial market distress and slowing global exports, with various nations enacting their own stimulus packages. China’s recently announced $586 billion stimulus program comes to mind.  A series of Chinese interest rate cuts have also taken place as this nation faces economic growth that may soon be half its prior blistering pace.

Japan’s economy continues to struggle to regain its 1980s economic magic.  Today?  Japan is again in recession. As before, the Japanese fear the rising Asian clout of the Chinese.

I have no doubt that European business leaders and politicians were laughing at the U.S. earlier this year for the enormous financial mess we got ourselves into. The laughter ceased when the Europeans soon realized their challenges might surpass our own.

Europe is now dealing with its own recession, with limited prospects for emergence anytime soon.  The weakness in home prices in many European nations exceeds that in the U.S., as many communities saw home prices skyrocket earlier in this decade.  More interest rate cuts are coming from the European Central Bank.

Russia’s critics have had a field day in response to its aggression into Georgia.  The Russians have experienced some of the global community’s most volatile stock market performance, in part tied to the collapse of energy prices.

Oil wealth continues to accumulate across the Persian Gulf.  However, many investors are losing sleep because of massive commercial development commitments that were predicated upon oil remaining north of $100 per barrel…whoops.

Major South American nations struggle with much lower energy and commodity prices than their respective budgets assumed. Other nations in the region struggle with high taxes, enormous business red tape, and highly anxious credit markets.

Canada is facing its own possible recession as its major export market…the U.S…struggles with recession.  Mexican growth is modest.

The Bottom Line?

U.S. economic recession will hopefully give way to modest growth by mid-year 2009. We also expect: a much larger budget deficit…rising unemployment…declining inflation pressures…record low short-term interest rates…stable energy prices…and a very weak global economy.

Reprinted with permission from the “Tea Leaf” by Jeff Thredgold.  Copyright, 2008, Thredgold Economic Associates, LLC.  To subscribe to Jeff’s free weekly email update, visit http://www.thredgold.com.”

Visit Economist, Global Futurist, and Keynote Speaker Jeff Thredgold web page to learn more about his programs.

To book Economist, Global Futurist, and Keynote Speaker Jeff Thredgold contact FIVE STAR Business Speakers at 913.648.6480.

Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:Economist and Keynote Speaker Jeff Thredgold’s Weekly Column: GLOBAL ABC’s

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates

This is the companion piece to Domestic ABCs of November 5
Anxiety—in great abundance across the global community

Budget Deficits—at record levels as the U.S., the English, the Europeans, and governments around the world spend $$ like there’s no tomorrow seeking to stabilize their respective economies and financial systems

China—don’t look now, but the Chinese just announced their own $586,000,000,000 economic stimulus package

Dollar—rising against the euro, the British pound, and various other currencies in recent months as their problems rival our own

Europeans—no doubt laughing at the U.S. earlier this year for the enormous mess we got ourselves into. No more jollies at our expense as Europe now deals with its own recession and financial market stress

Finance Ministers (and their U.S. Treasury Counterpart)—perhaps more critical than presidents/premiers/rulers at this point in time. Who’s on the tube more than Paulson?

Global Economy—facing possible recession in ’09. The U.S., Europe, and Japan are now in simultaneous recessions for the first time since following WWII

House of Cards (Financial)—excesses regarding exotic financial instruments, subprime loans, skyrocketing home prices across the U.S. and Europe, and a never-ending accumulation of debt by domestic and global consumers/corporations got us into this mess. The deleveraging of this house of cards is a painful and scary process

Interest Rates—moving lower around the world in an effort to stimulate economic growth. More cuts are coming in Europe and the U.K., with one more cut a possibility in the good ol’ US of A

Japan—in recession again, following “the lost decade” of the 1990s. They just can’t seem to get their act together

Korea (North)—massive failure of this centrally planned economy is without question. Meanwhile, Korea (South) has enjoyed solid long-term growth

Libor—(the London Interbank Offered Rate). A formerly nondescript global interest rate is now newsworthy in the U.S. as trillions of dollars of adjustable rate loans are tied to it

Media—in my view, simply making a bad situation worse. Constant negativity by the Business Weeks, the Newsweeks, and similar publications around the globe have raised fear levels higher and higher

News (as in Bad)—see M. “Bad news sells newspapers” has been pushed to a new art form during the past year. If your only source of info was The New York Times, you would never get out of bed in the morning

Oil—A moment of silence please for oil producers such as Venezuela and Iran, dealing with severe financial stress tied to the plunge in oil revenues. Then again, maybe not

Poverty (Global)—one in three global citizens lived on the equivalent of $1 a day in 1993. Today, it is one in five. Progress, yes…acceptable, no

Quagmires—as before, there never seems to be a shortage. Today’s list still includes Afghanistan, Chechnya, Georgia, Iraq, the Sudan, and the Middle East

Russia—sky-high oil prices and strong oil production led standards of living higher for millions of citizens in recent years. The recent plunge in oil prices (and Russian stock values) has spoiled the party

Stocks—under pressure around the world. More pain is likely. However, if you buy the eventual global economic stabilization view, tremendous opportunities are (will soon be) available

Taxes—the President-elect has talked of raising income, capital gains, and dividend tax rates on the wealthy. Doing so in recession might not be a real good idea

Unemployment—rising around the world as thousands of U.S. and global companies trim payrolls

Volatility—pick any descriptor…financial market…economic…political

www—the World Wide Web continues to be both amazing…and cluttered with junk. Still, estimates suggest we have tapped only about 10% of the potential of the Internet. Global companies will save in excess of $1 trillion in operating costs during the next three years using it

Xports—one of the few American economic stalwarts during the past year. However, a stronger dollar and global economic weakness will hurt

Young People (around the world)—facing a rising tax burden in coming decades to finance the retirement years of Baby Boomers (and Boomers’ parents) if minor changes are not soon made

Zero Sum Game (which global trade is not)—any trade restrictions (protectionism) we impose on another nation are soon matched or exceeded by that nation. Democrats must be very careful

Reprinted with permission from the “Tea Leaf” by Jeff Thredgold. Copyright, 2008, Thredgold Economic Associates, LLC. To subscribe to Jeff’s free weekly email update, visit http://www.thredgold.com.”

Visit Economist, Global Futurist, and Keynote Speaker Jeff Thredgold web page to learn more about his programs.

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Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:Economist and Keynote Speaker Jeff Thredgold’s Weekly Column:LABOR PAINS

Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates

What few remaining doubts existed about the U.S. economy being in a protracted and painful recession fell by the wayside on Friday, November 7 with the release of the October employment report. Not only was the October employment data ugly, but downward revisions to August and September job data only added to the pain.

The U.S. economy lost an estimated 240,000 jobs in October, roughly one-third more than expected. Adding insult to injury were revisions to estimated job losses of the two prior months, which now suggest an additional 179,000 people lost jobs during those months.

Completing the hat trick of ugly employment data was a sharp rise in the nation’s unemployment rate from 6.1% in September to a 14-year high of 6.5% in October. Even worse is the likelihood that the American jobless rate could approach 8.0% during 2009.

Economist, Keynote Speaker Jeff Thredgold

Shared Weakness

As in recent months, job losses were across the board. The nation’s goods production sector continued to hemorrhage, with the loss of another 132,000 jobs. Manufacturers cut jobs for the 28th consecutive month, with the loss of another 90,000 jobs. The strike at Boeing, now settled, added to the large loss. Construction employment fell by 49,000 jobs during the month, while natural resources added 7,000 jobs.

The nation’s service providing sector, which accounts for six of every seven American jobs, also got hammered during the month with a loss of 108,000 jobs. The professional & business services sector lost 45,000 positions, while the leisure & hospitality sector lost 16,000 jobs.

The retail trade sector lost 38,000 jobs during October, an ominous sign as the Holiday Season begins. Estimates of a strong Holiday retailing season are somewhere between zero and none, with weak retail sales expected.

Better news saw the government sector add 22,000 net new jobs during the month, with most of these in local government. The education & health services sector added 21,000 net new positions.

The average hourly wage rose 0.2% (four cents) to $18.21 hourly, a rise of 3.5% over the past 12 months. While the 3.5% rise trails the 4.9% jump in the Consumer Price Index over the most recent 12-month period, such is unlikely to be the case for long.

Inflation Down

The rapid downward move of oil and other commodity prices will have a positive impact on reducing inflation pressures in coming months, just as oil and commodity price hikes aggravated inflation during much of 2008. Two recent surveys of veteran (meaning old) economists conducted by USA TODAY and Blue Chip Financial Forecasts that I participate in foresee consumer prices in 2009 rising 2.0% and 1.8%, respectively. Note that there are as many concerns about deflation in 2009 and 2010 as there are about inflation.

The U.S. economy has lost nearly 1.2 million net jobs during 2008, with more than half of these losses during the past three months. Employment data of coming months could be equally bleak.

U.S. economic output (GDP) declined at a 0.3% real (inflation adjusted) annual rate during the third quarter. Most estimates for the current quarter suggest economic contraction at a real annual rate of around 3.0%-4.0%.

Many estimates for 2009’s first half suggest additional, if less painful, contraction. As before, most forecasters see modest economic growth during next year’s final six months.

10 and Out?

A rising number of forecasters expect the Federal Reserve to trim its key interest rate from what is already a 50-year low of 1.00% to (most likely) 0.50% on or before December 16, the date of the next regularly scheduled FOMC meeting.

As noted before, another cut will do little for the economy other than provide some temporary warm & fuzzy feelings for investors and consumers. The problem in recent months has not been the price of money (the interest rate). The problem has involved the availability of money.

2009 Turn?

The deleveraging of the financial “house of cards” constructed in the U.S. and around the world over the past 5-10 years is a scary and highly uncomfortable process. Additional pain is coming.

However, a major change in political leadership, a rising sense that housing prices will stabilize by mid-2009, and a view that positive (if minimal) economic growth will return in 2009’s second half gives us something to hang our hats on…

…keep your fingers crossed

“Reprinted with permission from the “Tea Leaf” by Jeff Thredgold. Copyright, 2008, Thredgold Economic Associates, LLC. To subscribe to Jeff’s free weekly email update, visit http://www.thredgold.com.”

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