Coming for the Summer of 2012 – The Great Economic Slowdown of the Summer of 2011

The Economic Problems in the U. S. were not Cured and a Relapse is Coming

Last summer was a bummer.  After a strong late winter and spring, the U. S. economy slowed substantially in the summer and fall of 2011.  Now it looks like history is about to repeat itself, and not in a good way.

The U.S. economy slowed more than initially thought in the first quarter amid smaller gains in consumption and inventories, while corporate profits picked up. Separately, two measures of the labor market indicated continued sluggish job growth.

The Labor Market did not do well in April and May is not likely to be encouraging.

Initial jobless claims rose by 10,000 to seasonally adjusted 383,000 in the week ended May 26, the Labor Department said Thursday. It was the biggest jump in claims since the first week of April.

The slowdown in hiring is already evident.





In fact, there is nothing encouraging on the horizon and every indication that things will get worse.

1. There is huge uncertainty in the tax area.  A nation can thrive on high taxes and a nation can thrive on low taxes.  What it cannot do is thrive on uncertainty in taxes.  A large number of temporary tax provision expire at the end of the year.  Mr. Obama has made clear what he wants to do, but no one believes he will have the political power or will to do it.  Mr. Romney has not made clear what he would do, and nobody know what will happen if he is elected.  In situations like that business does not invest.

2. The dark clouds of Europe blow over the United States.  As Europe heads towards economic calamity the U.S. benefits from funds coming into this country, and the result is low interest rates.  But interest rates are already low, going lower will not help.  Unrest and economic recession in Europe will surely spill over to the United States.

3. The fall election will serve to further divide rather than unify the country.  A nation divided against itself cannot have economic growth.

4. Much of the recovery in the winter was due to a mild temperature which reduced heating bills.  Winter is over, along with its positive impact.

5. International issues in Syria and Iran threaten world stability.

Yes, there is a lot more and yes, there are always negatives in the horizon.    But there doesn’t seem to be a lot of positives, and slower growth will almost certainly produce a Republican sweep in the fall.  And if that happens, well things really get bad.

Have a nice day!