The economy added 118k jobs in November, if you go by the ADP report, or 146k jobs if you go by the noisier official number. Let’s call it 118k because we’ve consistently touted the value of the ADP report. By any measure, it was a lot more than was expected, given the landfall of hurricane Sandy at the end of October.
Now that the election is over, there is growing optimism that the economy is indeed … growing. It’s not a lot, but it’s there. And that’s where we stand as we move into the next phase of the political season – the part defined by getting down to work and making use of the mandate given by voters. That mandate is clearly defined by a divided Congress and a Democratic President who are at odds over how to either avoid the Fiscal Cliff or, perhaps, go over it.
Even if the election didn’t tell us much, the economy is. We’d be wise to listen to it.
There is little doubt that economic optimism is on the rise. This Christmas season, a lazy way of gauging economic health, is up as much as 26% over last year. We’ve added over 1.2M jobs since then, making a decent dent in unemployment, and consumer surveys are improving. What could possibly mess things up?
The answer, of course, comes from government – where uncertainty over the Fiscal Cliff and its potential impact has been weighing heavily on the stock market. Make no mistake, the economy is growing but fragile right now, and even a small mis-step could reverse what has been just enough strength for those of us who follow it to predict an end to the Depression by 2017.
Those of you who follow Barataria will know that we have been optimistic for nearly a year now. There has been a gradual up-tick that started in the dark days of 2010 and started to gather steam in 2011. This was the year when it became clear that the worst was over – and it was good enough to garner Barack Obama a solid re-election win.
That’s where we stand now. The stakes are quite high for 2013 because this should be the year in which the growth sinks in and real progress is made. You can see it in the latest job reports. Even a hurricane didn’t stop employment from expanding in a reasonably dramatic way as we enter the bizzy holiday season.
The only threat that remains is political instability, coming either from Europe or from our own congressional crises. You may want to add tax increases at the state level if you want to be critical of Barataria’s recent analysis of Minnesota (and that would be fair). Those of you who think there is nothing to lose as we enter the negotiations should take stock of how well things are going right now.
And that’s the real problem for government as we know it. We have yet to talk about what the next economy is going to look like, let alone how we will restructure government to meet whatever challenges lie ahead. Just as we spend a solid $100B or more on military bases in Europe, government is always fighting the last war. The fight over the budget has little to do with the economy that is growing around it other than to be a potential threat.
As Alan Simpson has said, “The deficit is so big that we can’t tax our way out of it, we can’t cut our way out of it, and we can’t grow our way out of it. We have to do a combination of all three.” Simpson, the Wyoming version of Solomon for our time, is exactly right. But the budgets that are being considered generally trade-off cuts and taxes in equal measure. Growth? We’re just hoping that continues pretty much as it has been. Thanks!
There are other ways, of course. Infastructure development is the best way to encourage growth, as are a number of other ways of promoting the restructuring to the next economy that we have trouble defining even now. If we really paid attention to Sen. Simpson, we would include what we can to promote what is already starting to happen around us – solid, reasonably growth in economic activity and jobs.
Then again, right now the best thing that government can do is not mess it up. That’s about all any of us are really hoping for. But there is a lot to mess up if they do this wrong. The economy is indeed rebounding very nicely. Let’s avoid that “Fiscal Cliff”, shall we?