U.S. farmers and consumers who are trying to figure out what the future holds aren’t getting much help from Washington these days. As a result, they may need to pick out some economic indicators that could help them chart their course.
Ernie Goss, professor of economics at Creighton University in Lincoln, Neb., identified some of those indicators while giving members of the American Society of Farm Managers and Rural Appraisers his take on the current economic outlook at the ASFMRA’s 80th annual meeting in Denver.
“We’re all sitting on the sidelines, trying to figure out what’s happening,” said Goss, a graduate of the University of Tennessee who has held a number of public and private economic positions over the years. “I’ve never seen this much uncertainty over government policy and the national economy.”
While that might be a good scenario for economists and lawyers, it gives little comfort to farmers and other small business owners and consumers, said Goss. The uncertainty over the so-called cap and trade legislation, health care reform and tax increases are causing nightmares for much of America.
“I also have a small consulting business, and I’m sitting here thinking, ‘Should I hire now, should I hire later; should I buy a car now, should I buy a car later; should I buy a house now, should I buy a house later?” he said.
“We have millions of people sitting on the sidelines, and the chief, No. 1 economic problem we’re facing now is the lack of clarity. We don’t know the answers to those kinds of questions.”
Goss said the Commerce Department report issued when he spoke Thursday was “a very good sign.” The government reported that the nation’s gross domestic product grew by 3.5 percent in the third quarter of 2009.
“We don’t know how much of that is cash for clunkers or the tax credit for first-time home buyers,” he said. “We’re also likely to see continued high unemployment numbers until companies begin to do more hiring.”
Goss, one of 200 economists who took out a full page ad saying “We are not all Keynesians,” that appeared in the New York Times and the Wall Street Journal earlier this year, said he believes the government’s fiscal policies have not helped the economy all that much.
“Yes, the economy needed some stimulus; there’s no doubt about that,” he said. (Followers of the British economist John Maynard Keynes believe government spending or economic stimulus packages are the key to pulling the economy out of a recession/depression.) “Whether it was the right stimulus package is the question?
“It may be that if the government had allowed some of these big companies like AIG and General Motors to fail, it would have hurt, but we might also have a lot of this behind us now. We also wouldn’t have $11.2 trillion in federal debt.”
So what indicators should you be looking for in the coming months?
• The employment report for October will be released Nov. 6. “I expect the report to show job losses (above 200,000 persons) for a 24th straight month and an increase in the unemployment rate by 0.2 percent,” he said. “If the report goes above 10 percent unemployment, that would be very bad. A good report would be only 100,000 jobs.”
• First-time and continuing claims for unemployment insurance. This report is released every Thursday. “First time claims above 550,000 will be bearish,” he said. “I expect this number to drop below 500,000 by December (www.doe.gov.)
• The first and most important indicator for November will be the Mid-America and U.S. October Purchasing Manager Institute’s survey released Nov. 2 (www.outlook-economic.com and www.ism.ws.) “A drop in the national will be bearish (under 50 will be very, very bearish.”
• Goss suggests you keep an eye on the yield for 10-year U.S. Treasuries. If this yield approaches 4 percent within the next month, the Federal Reserve Board will be “between a rock and a hard place.” The rapidly rising yields reflect: (1) concerns regarding the large increases in the U.S. budget deficit; (2) rising inflation expectations; and (3) investors have reduced their risk perceptions and are pulling money out of treasuries and putting it into equity markets (“a good thing”). (http://finance.yahoo.com.
• Investors will be closely watching retail sales to detect a weak consumer reading. A weak consumer market will be a bad signal for the holiday buying season.
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