Monday, April 9, 2007

Recession "Hopes" Getting Thinner

For all caterwauling of a 2007 recession, the economy really isn't cooperating. While the chance of a recession over the next few years remains, the causality may be in a different ballpark than the current threats.

March reports show unemployment is down to 4.4%. The Wall Street Journal explains:

U.S. financial markets were closed Friday, which was just as well for those on Wall Street and in Washington who've been betting on a recession. The bullish employment report for March would have ruined their Easter weekend.

Everyone else, however, can rejoice that the economy created 180,000 net new jobs, along with upward revisions of 32,000 for January and February. The unemployment rate fell to 4.4%, down from 4.7% a year earlier and matching the lowest rate in six years. Since mid-2003 and the passage of the second round of the Bush tax cuts, the U.S. economy has added 7.8 million jobs.
David Malprass, Chief Economist at Bear Stearns & Co., predicted in this weeks Forbes that
The next recession--probably a ways off-- is more likely to be caused by the normal government-directed growth killers, taxes and inflation, than by a business cycle. Washington as halready put into law histories biggest tax increase, which goes into effect January 1, 2011, increases on income, capital gains, and dividend taxes scored at $4 trillion (based on Washington's silly assumption that there's no economic impact from taxes).
(See post below for more on 2011 tax hikes)

Consistent with historical precedent--most recently the economy's stability through Katrina and high gas prices-- Congress should steer clear of the protectionist policy lure, make Bush's tax cuts permanent (then seek legitimate tax reform), and avoid recessions blamed on cyclical markets.

1 comment:

Barley said...

Wow! As for now, the jobs seem to be getting better. Do you think that the tax increase in 2011 will effect the jobs in a bad way?