Economists Expect Late-Year Economic Recovery, But Confidence Fails

As the economy continues to suffer, economists predict that the recovery will not be immediate. In fact, more than 630,000 jobs are expected to be lost in April, with an annual pace exceeding 7.5 million. The meltdown at General Motors and Chrysler has led to a hemorrhaging effect in the Midwest, with depression-like conditions emerging. Team Obama's claim that employment is a lagging indicator may hold some truth, as the economy began losing jobs in December 2007, three quarters before gross domestic product began contracting.

Key Takeaways:

• Economists expect a late-year economic recovery, but their conviction is failing, with predictions of 630,000 jobs lost in April and an annual pace exceeding 7.5 million.
• The meltdown at General Motors and Chrysler has led to a hemorrhaging effect in the Midwest, with depression-like conditions emerging.
• The economy began losing jobs in December 2007, three quarters before gross domestic product began contracting.
• Team Obama's claim that employment is a lagging indicator may hold some truth, but it ignores the structural imbalances in the global economy.
• Treasury Secretary Timothy Geithner's promises of stronger international cooperation and a "balanced" economic recovery ring hollow, as he fails to explain why the U.S. economy needs gargantuan budget deficits or massive consumer borrowing to create demand.
• China and several other developing countries produce far more than they consume and enjoy huge trade surpluses, thanks to artificially undervalued currencies, export subsidies, and import restrictions.
• The U.S. must amass huge trade deficits and foreign debt to keep Americans working, or global demand falls short of supply and unemployment skyrockets.
• The global economy collapsed once Americans were no longer able to live beyond their means, and Obama has volunteered the federal government as the borrower of last resort.
• China complains Washington borrows too much, but Beijing's massive sales of yuan for dollars on foreign exchange markets to keep its yuan cheap are the real issue.
• The People's Bank of China buys U.S. treasuries because it does not have any better use for the dollars it obtains manipulating the yuan to boost exports.
• Washington needs to challenge China on trade and currency manipulation to dig out of the Great Recession and boost demand for U.S. growth and employment.

Statistics:

• More than 630,000 jobs are expected to be lost in April at an annual pace exceeding 7.5 million.
• The U.S. economy began losing jobs in December 2007, three quarters before gross domestic product began contracting.
• The unemployment rate has skyrocketed since the global economy collapsed, and Americans are no longer able to live beyond their means.
• China's massive sales of yuan for dollars on foreign exchange markets to keep its yuan cheap have resulted in huge trade surpluses and a hoard of dollars.
• The U.S. must amass huge trade deficits and foreign debt to keep Americans working, or global demand falls short of supply and unemployment skyrockets.

Sources:

• Peter Morici, a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission
• United Press International's "Outside View" commentaries
• April 27 UPI article by Peter Morici