A Look Back, a Look Ahead
In many ways a look into 2012 will be a look back to 2011. CEA’s current economic forecast suggests the economic landscape—and many of the commonly watched economic metrics—will be little changed in 2012. This is a similar story to the one that played out in 2011.
We started 2011 with the unemployment rate hovering at nine percent, very near where it is today. The employment picture will be little improved in 2012, and I expect that we’ll close 2012 with the unemployment rate near today’s levels. In 2011 consumers continued to move away from revolving credit, a trend I expect will continue through 2012. Moreover, with no real job growth we are not likely to see much disposable income growth. All told, the state of the consumer will not be noticeably different in 2012.
The economy “officially” grew in 2011, but we were mired in near-zero growth through the first half of the year. After spending the first six months of the year in a growth recession, the rate of economic growth did accelerate in the second half of 2011. I expect this trajectory to continue in 2012, but there are still strong headwinds.
Last year was mired by uncertainty, first with political unrest in North Africa and the Middle East, followed by recessionary concerns in the U.S. and fiscal uncertainties in the Eurozone. I expect uncertainty to linger throughout 2012. Europe is a problem in need of a political solution where no political solution can be had. Europe will be in recession in 2012 and some parts of the Eurozone are arguably already in recession. This will put downward pressure on the United States in several ways.
Europe represents some 20 percent of U.S. exports, so slower growth in Europe translates to slower growth in the U.S. Europe also represents about 20 percent of Chinese exports, which U.S. growth could be hindered via China. Lastly, U.S. banks have exposure to Europe, and a slowdown in Europe could mean U.S. banks limit domestic lending, which will conversely stymie growth in the U.S.