Tuesday, November 10, 2009

Comin My Way

It seems that economists have revised their unemployment rate forecasts up to 10.5%. http://www.cnbc.com/id/33824139

This is up from forecasts 6 months ago when people were between the 9.5% and 10.2% range. I have said 12% by the end of 2010 all along. I stand by that today. The reason is that this recession has 2 waves. Wave 1 is about coming to an end. It's the natural cyclical variation in an economy after a shock like we had last September. It should have already ended but Obama confusion has set in.

Wave 2 is coming. Most economists are missing this because they are slaves to panel data sets and modeling. Forecasting the future is as much about intuition as it is analysis. Wave 2 is due to Obama policies becoming law, "stimulus" spending being wound down, and the Fed putting the brakes on liquidity, which they will have to do. Wave 2 is going to be ugly but will hit when the Senate passes a healthcare bill that will start a frenzy of panic for small business owners trying to figure out what it means and being horrified when they do finally figure it out. It has implications.

So, we'll see. I could actually see it going even higher than 12%. Hopefully, it won't hit me.

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