Predict the 2013 Economy

[Direckshun]

Pretty interesting observations from Bill McBride.

I'm pretty sure there will be a fiscal cliff agreement in late January, early February, as I've said a couple times in the Fiscal Cliff megathread. I'm fairly certain that fiscal cliff agreement will slow the economy down, along with the economic implosions in Greece and Spain. But I'm certain that agreement will take the debt limit off the table in 2013.

The absolute best thing going is the housing market. It almost doesn't matter what our policy is (so long as it isn't debt limit suicide), as a sturdy housing recovery will drive the entire economy damn near by itself.

I think we're looking at slumpy but steady improvement for about six months, then as fiscal policy settles down, a strong second half of the year.

http://www.calculatedriskblog.com/20...=Google+Reader

Ten Economic Questions for 2013
by Bill McBride
on 12/24/2012 06:43:00 PM

Here are some questions I'm thinking about ...

1) US Policy: This is probably the biggest downside risk for the US economy in 2013. I assume some sort of fiscal agreement will be reached soon, but how much austerity will be included? What will happen with the Alternative Minimum Tax (AMT)? What about emergency unemployment benefits? What about extending the mortgage relief for debt forgiveness (important for short sales)?

And what about other policy in 2013 such as the "default ceiling" (aka debt ceiling)? In 2011, the threat of a US government default slowed the economy to almost a standstill for a month. Right now the White House is taking the Ronald Reagan approach (when the Democrats pulled a similar reckless stunt) and they are saying President Obama will only sign a clean debt ceiling bill. Good. Hopefully default is off the table, but you never know.

2) Economic growth: Heading into 2013 there are still significant downside risks from the European financial crisis and from U.S. fiscal policy. Will the U.S. economy grow in 2013? Or will there be another recession?

3) Employment: How many payroll jobs will be added in 2013? Will we finally see some pickup over the approximately 2 million private sector job creation rate of 2011 and 2012?

4) Unemployment Rate: The unemployment rate is still elevated at 7.7% in November. For the last two years I've been too pessimistic on the unemployment rate because I was expecting some minor bounce back in the participation rate. Instead the participation rate continued to decline. Maybe 2013 will be the year the participation rate increases a little, or at least stabilizes. Economists at the SF Fed wrote about this last week: Will the Jobless Rate Drop Take a Break?

The recent recession was unusual in its depth and its duration. Labor market conditions have remained difficult for a long time. As a result, large numbers of discouraged workers have stopped looking for jobs. A big unknown is whether these workers will stay out of the labor force permanently or enter as the economy recovers. If these workers join the labor force, increasing participation could have a major impact on the unemployment rate in the coming years.

What will the unemployment rate be in December 2013?

5) Inflation: The Fed has made it clear they will tolerate a little more inflation, but currently the inflation rate is running below the Fed's 2% target. Will the inflation rate rise or fall in 2012?

6) Monetary Policy: Currently the Fed is planning to buy $85 billion in Treasury and agency mortgage-backed securities per month as part of the open-ended QE3. Will the Fed continue all year at this pace? Or will the Fed increase their purchase rate? Or will the Fed decrease their purchase rate, stop these purchases, or even sell some securities?

7) House Prices: It now appears house prices, as measured by the national repeat sales indexes, bottomed in early 2012? What will happen with house prices in 2013?

8) Housing Inventory: Over the last few years, we've seen a dramatic plunge in existing home inventory. Will inventory bottom in 2013?

9) Residential Investment: Residential investment (RI) picked up in 2012, with new home sales and housing starts increasing 20% or so. Note: RI is mostly investment in new single family structures, multifamily structures, home improvement and commissions on existing home sales. This still leaves RI at a historical low level. How much will RI increase in 2012?

10) Europe and the Euro: What will happen in Europe in 2013? Will a country leave the euro this coming year, will the euro-zone implode, or will 2013 be the bottom for the euro-zone economies?

I'm sure there are other key questions, but these are the ones I'm thinking about now.

[notorious]

The cycle is due for a huge comeback.

[Mrs. Loopner]

Originally Posted by CoMoChief

Dude just about EVERY SINGLE THREAD you start in this forum is absolute BS.

I have to disagree with you on this. Although I don't agree with everything Direckshun posts I have found several informative and educational.

[Mrs. Loopner]

Originally Posted by Ebolapox

my prediction? we're ****ed. we've been ****ed for a good long while, but we're still ****ed. doesn't matter who we elect/re-elect, doesn't matter what laws are passed, we're ****ed. our children are ****ed, our parents are ****ed, our grand-children are ****ed. everybody is ****ed. it's not a pretty ****ing either, it's just ****ing ridiculous. no goddamned common sense, no goddamned sense at all--just a good, solid ****ing.

Definitely this!!!!

[Comrade Crapski]

[Direckshun]

I'd more or less like to take this opportunity to revise my projections downward.

It's pretty clear that the tactics of Congress right now is to enact a series of critical "cliffs" over the entire year.

So long as that's happening, uncertainty will reign supreme and businesses will continue to be skittish on making investments.

[Bewbies]

Originally Posted by Direckshun

I'd more or less like to take this opportunity to revise my projections downward.

It's pretty clear that the tactics of Congress right now is to enact a series of critical "cliffs" over the entire year.

So long as that's happening, uncertainty will reign supreme and businesses will continue to be skittish on making investments.

Have you not been paying attention to the last 4-5 years? This isn't new, and it's not just Congress...

[Direckshun]

Originally Posted by Bewbies

Have you not been paying attention to the last 4-5 years? This isn't new, and it's not just Congress...

What do you mean?

[blaise]

Good news, Obama.
Bad news, Bush.

[Comrade Crapski]

Ladies and gentlemen, I give you Exhibit A why we just re-elected a communist...

Originally Posted by Direckshun

What do you mean?

[chiefzilla1501]

We have to cut wasteful spending. We all get that. Is that going to rebound the economy? Not as much as people claim -- a lot more is needed.

This economy will rebound because there's nowhere to go but up and construction will rebound, which is one of the big laggards in the small business space.

But it's not good enough, and both sides are responsible. The economy will never truly recover and the US businessscape will never be positioned to succeed in the long-term if we don't create an environment that encourages entrepreneurs to take risks and corporations to invest back into growth instead of lining their own pockets. The right has to stop defending corporate greed that is putting money into a select few instead of investing it back into growing long-term shareholder value. The left has to stop pretending like mini tax breaks for small businesses fixes anything, as long as they are crippling businesses and corporations with unnecessary regulations and taxes that more than anything, increase the cost of doing business and increase the safety net they have to set up to protect themselves from risk that leads to potential payouts.

[Bewbies]

Originally Posted by Direckshun

What do you mean?

You thinking this series of 'cliffs' is something new, or something that 'Congress' alone is doing.

Be careful trying to figure this out, you may end up with a different opinion of your Lord and Savior.