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Outlook for the 2010 Economy (with poll)

January 3rd, 2010, 04:01 am admin Leave a comment Go to comments

Anyone who follows economic statistics knows that reports coming out this month are mostly going to be one heckuva lot better than they were last January.

For instance, in January 2009, the Department of Labor reported a net loss of 741,000 jobs for the previous month. Next Friday, it wouldn’t surprise anybody if the report showed a small net gain for the first time in two years, say 50,000 or so. And there might also be a revision in last month’s figures, turning the previously reported net loss of 11,000 into a small net gain.

The same can be said of gross domestic product numbers. The first estimate for the fourth quarter of 2009 will come out January 29. At a rate of 2.2%, final numbers for the third quarter turned out not to be nearly as strong as the 3.5% they were first said to be, but they nonetheless were in positive territory after four quarters in the negative. The fourth-quarter numbers for 2009 will also no doubt show growth. Whatever the final calculation of GDP proves to be, we can be certain that it will be far better than the plunge of 6.4% in the fourth quarter of 2008.

But, while these statistics – and many others – indicate that the economy is improving, there’s a long, long way to go before it can fairly be called a recovery. While we may be emerging from a record-breaking period of net job loss, more than 15 million Americans are still unemployed. Another 13 million to 15 million are underemployed or so discouraged they have stopped looking for work. Many who are unemployed who have been surviving on unemployment compensation will see their benefits expire in a few months. The Great Recession has been catastrophic for millions of Americans, and for many of them, the worst is yet to come as their savings dwindle, their homes are foreclosed, and their old jobs are permanently done away with.

Thus, while we’re not going to see another 1.8 million layoffs in the coming three months, as we did in the first quarter of 2009, we’re also not going to see very many of those vacant jobs filled. Indeed, the majority of expert observers expect that the unemployment rate will hover between 9% and 10% for all this year. There are contrarians who see it much worse or much better. Views regarding 2010’s growth in GDP – that majorly flawed but widely used calculation – range from 2.3% to as much as 5%.

Calculated Risk ran a poll at the end of the year regarding readers’ expectations on GDP growth and unemployment for 2010. They were quite pessimistic. More than half predicted a double-dip recession. Only 13% or respondents said growth would be above 2%. The vast majority said the unemployment rate would still be in double digits.

We can’t run two polls in the same diary here, so the unemployment rate has been chosen as our measure.  

As most Daily Kos followers of the economic news know, the official “headline” unemployment rate, what the Bureau of Labor Statistics calls “U3,” is not really the best measure of who is out of work since it excludes “discouraged workers” and those working part-time because they can’t get full-time work. “U6″ is a much better figure, although even that is viewed as incomplete by some critics. U6 includes the underemployed and a portion of “discouraged” workers.

But, because U3 and U6 do move in tandem with each other,  U3 was chosen for our poll so the results here can be better compared with those at Calculated Risk. Our poll and theirs are, of course, unscientific. The results may or may not have any relationship to how a scientific poll of randomly selected Americans would respond.      

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