Late last week and over the weekend, a flurry of developments related to the near and longer term economic outlook took place, most of which could be a cause for concern.
Europe is economically big — very big. The 17 nation euro-zone is approximately equal to the size of the U.S. economy (depending upon how valuations are calculated in terms of currency conversions), and the more comprehensive 27 nation European Union (EU) is even bigger still. Given the tremendous economic interdependencies among countries of the world, when an economy as large as either of the above entities begins to experience significant economic problems, it is just a matter of time until those difficulties will be transmitted to the rest of the world.
As quickly as possible people should move to their home’s storm cellar or place themselves in the bathtub with a mattress on top so as to shield themselves from the rapidly approaching economic storm. Or so the message would seem to be, according to many economists, after the Labor Department’s “disappointing” labor market reports last Friday. Fortunately, the stock market was closed for Good Friday observances so the ensuing panic was stalled for a few days.
Earlier this month Site Selection magazine awarded its grand prize to Ohio for being the state with the most major business expansions in 2011 at 498 projects. The runner-up was Texas with 464 such projects. As might be expected, Ohio officials, including Mark Kvamme as head of Governor Kasich’s JobsOhio program, declared the victory a vindication of their efforts and suggested Ohio would remain a leader in attracting major expansions and new businesses, thereby producing good job growth for Ohioans.
The housing industry is suffering, in part because the structure of our nation’s financial markets does not allow us to escape from past mistakes. To a significant degree, this inability to break with the past can be directly blamed on a federal government that clings to its own ineptness and forces the marketplace to adjust for the mismanagement of the two GSEs, Fannie Mae and Freddie Mac.
Late last week the Ohio Department of Job and Family Services released December 2011 employment/unemployment figures for the greater Columbus area, with the unemployment rate — not adjusted for seasonal variations — dropping to 6.4 percent. This rate was down from November’s 6.6 percent, and was far below the unemployment rate of 7.7 percent in December 2010. And the reaction at the Department of Job and Family Services? According to their spokesman, Benjamin Johnson, “It shows definite improvement … (i)t shows a strengthening economy and an improving job market.”
What a difference a week makes. Last week as I described my 2012, economic outlook I undoubtedly came off as a pessimist rather than the “pragmatic optimistic” label I attached to myself. In my analysis, I indicated that other analysts might not be considering the full range of issues that could keep growth relatively modest throughout the year, including the influence of the EU sovereign debt crisis, the uncertainty regarding the state of consumer finances and the over-estimated strength of labor markets.
Political gridlock, strained family budgets, financial crises throughout the euro-zone, mediocre U.S. employment and economic growth… all of these things and more that exemplified 2011 are likely to continue into 2012. And all of this despite the perception among many economists that 2011 ended on a strong note that may possibly continue into 2012.