An article today titled ‘Is China Leading a Global Recovery?’ says “Increasingly, many companies see China as their ticket to surviving—and even thriving—in a post-recession world because of its insatiable appetite for goods as it moves toward a consumer-driven economy”.  The article also says “a lot of people are starting to believe America and China are in two very different boats” and includes interview comments with executives of major companies – at least one of which is quoted as saying:  “Is China going to lead the global economy out of this slump?  I wouldn’t think so”.  For the following 20,000 foot reasons that is the camp I am in:

•    first, from everything I have read I believe it will take China many years to develop a consumer based economy that will to an important degree be significantly internalized and self-sufficient;

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An article this morning titled ‘Recession eases; GDP dip smaller than expected’ reports U.S. GDP fell 1% in Q2, and that the U.S. economy has now contracted for a record four straight quarters for the first time on record dating to 1947.  This has led to predictions such as “The recession looks to have largely bottomed in the spring. Businesses have made most of the adjustments they needed to make, and that will set up the economy to resume growing in the summer” (Joel Naroff, president of Naroff Economic Advisors).  The article goes on to say  “Even if the recession ends later this year, the job market will remain weak. Companies are expected to keep cutting payroll through the rest of this year, but analysts say monthly job losses likely will continue to narrow”, and “unemployment — now at a 26-year high of 9.5 percent — will keep rising. The Fed says it will top 10 percent at the end of this year. Businesses will be unlikely to boost hiring until they’re certain the recovery has staying power”.  Note the Fed thought only 3 months ago U.S. unemployment would top out at 8.5% – watch for the July numbers which ought to begin to surface next week.

See my post earlier this week on ‘the meaning of economic recovery’, and consider my ongoing comments related to what I see it the importance of focusing on absolute numbers, not percentages.  Even if U.S. GDP returns to positive territory in the next quarter or Q4, unless U.S. job losses strongly reverse (which I don’t see happening) in my view ‘so what’.  All comments on recovery based on ‘a slowing of bad results’ to me are similar to the common result you get when you ask people “How’s it going”.  How many people have you asked that question of to be told “no good”, “terrible”, ‘badly”, etc.  I’ll bet you not many – that certainly has been my life-experience with asking that question.

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An article today titled ‘Unemployment spreads distress in U.S. home loans’ says RealtyTrac reports that cities in California, Florida, Nevada and Arizona dominated in numbers of foreclosures in H1, 2009.  The article says “the source of the mortgage trouble has swung from lax lending standards to unemployment” and that RealtyTrac in its midyear metropolitan foreclosure report says that “More than 20 percent of areas with above-average foreclosure activity were in Oregon, Idaho, Utah, Arkansas, Illinois and South Carolina in the first half of the year. That shift points to growing unemployment more than to fallout from subprime and adjustable-rate loans”.  RealtyTrac reported a record 1.9 million foreclosure filings on more than 1.5 million properties in H1 2009, and forecasts 4 million filings for the year.

That there would be a co-orelation between unemployment and foreclosures makes sense to me, and for me this ties into my ongoing concern that until Job losses are reversed for extended period of months any meaningful U.S. economic recovery is unlikely.

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An article this morning reports on a  Wall Street Journal/NBC poll titled ‘WSJ/NBC Poll: Insecurity Spreads in the Labor Market’ that found although 44% of those Americans think the economy will improve in the next 12 months, only 60% said they were ‘somewhat or very satisfied’ with their job security – down 8% from April and 10% from January.  It seems to me this does not bode well for either near-term increases in retail sales  or U.S. Federal, State and Municipal revenues in 2009.  I think we can look to an even larger U.S. Federal Government Deficit in 2009 than currently is being forecast.

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