Wednesday, July 6, 2011

No double-dip risk, just more of the slow recovery blues


The message of this chart of announced corporate layoffs is that there is no sign of any deterioration in the job market. Indeed, layoff activity remains unusually low. Large corporations long ago finished their restructuring activities. We've already seen a pickup in new hiring activity, but to date it has been fairly modest.


Although new hiring activity has increased only modestly, conditions today are still far better than they were one and two years ago. In the very large service sector, businesses' new hiring intentions are in positive territory (second chart), but far from what might be termed robust. So while bad news has slowed to a trickle, we are still waiting for the really good news.

In my view, we aren't likely to see any real strength in the U.S. economy until such time as the federal government makes a determined effort to cut back on its spending addiction, simplify the tax code, reduce and flatten tax rates, and ease up on the regulatory pressure. Massive federal borrowing leaves no room for private sector initiative, corporate tax rates are the highest in the industrialized world, and the tax code's complexity is beyond comprehension. As I've mentioned before, the federal budget deficit has absorbed every dime of corporate profits since the recovery began two years ago.

I still think this is possible, and mainly because there really is no alternative. We've had our great experiment with Big Government and it has failed. Time now to give the private sector a chance.

9 comments:

Benjamin said...

Amen on the tax code. A complicated tax code is inherently unfair.

KISS-Keep It Simple, Stupid.

I favor a national sales tax, a national gasoline tax, no income taxes at all for those under $100k in annual income, and a 25 percent flat tax above $100k in annual income. No deductions at all.

And limit federal outlays to 16 percent of GDP.

Well, nice to dream.

John said...

"no room for private sector initiative."
Baloney. No guts for private sector initiative is more like it. Can't make a move without a goverment backstop.

EFFECTIVE Corporate tax rates are average for the OEDC nations.

CBP is mainly a political blog.

brodero said...

Private sector is not going to
increase residential investment much
for quite a while...so where is the
private sector held back by government? Talk in GDP terms??
Durable goods??? Equipment and
Software spending?? Granted the
anti business bias of the Obama
administration is a great hinderance but the economy is a greater giant than the U.S. government.

sgt.red.blue.red said...

It's the nineteen thirties all over again. Amazing how these lessons have to be learned over and over again.

Despite all the gloom, in the WSJ the other day, a chart depicted the growth in corporate profits was the best or second best coming out of the most recent recession, compared to all recessions back to the 1949 dip.

So, the negativity keeps stock prices depressed, therefore more time to accumulate shares at good prices. There is a silver cloud in this after all.

Benjamin said...

Obama missed a chance to re-orient his party into "pro-business Democrats."

Bush Jr, missed a chance to demilitarize the Republicans.

Hey, Obama and Bush jr. hewing to party lines has only cost us about $6 trillion.

Joe5858 said...

Scott, Can you point me towards the post in which you have previously explained your thoughts regarding the federal budget deficit and corporate income? Thanks.

Scott Grannis said...

Joe: you can start by looking at this post:

http://scottgrannis.blogspot.com/2011/06/capital-spending-still-strong.html

Scott Grannis said...

And continuing with these posts:

http://scottgrannis.blogspot.com/2011/06/capital-spending-still-strong.html

http://scottgrannis.blogspot.com/2011/05/corporate-profits-remain-very-strong.html

Joe5858 said...

thank you