What’s in it for the New Year?

Irwin Stelzer, of The Weekly Standard, offers some excessively realistic predictions for 2012.

Some examples follow; their accuracy, as Stelzer points out, depends on the likelihood of some things occurring—whether you believe in certain “ifs,” in his terms.  Stelzer mentions certain possibilities in Europe, but I’ve dwelled on the doings of that continent several times already; I’ll just mention some of his “ifs” for the US.

If you believe that the recent jagged but downward trend in claims for unemployment insurance foretells a drop in the unemployment rate that will be reported on Friday, and if you give weight to recent cheery numbers such as the uptick in regional indices of economic activity, you will stop worrying about the possibility of a renewed collapse in the jobs market.

If you read the recent upsurge in consumer confidence and spending to be suggesting that the demand side of the economy is ready to contribute to a more rapid recovery, you will murmur a word of thanks to the sainted John Maynard Keynes, and face 2012 with equanimity

You’ll also be, I think, ignoring the spike nature of the hiring, as it was primarily for temporary labor to man the retail stores and related endeavors as retailers and suppliers ramped up for that part of the year—Thanksgiving through New Year’s—when consumer shopping itself spikes for holiday buying.  You’ll also be ignoring this same season’s normal spike in optimism as the Christian optimism that underlies the two holidays dominates, as does the festive nature of the season, at least for a little bit.  And you’ll be ignoring three years of belt-tightening under these difficult economic conditions that produced what economists call pent-up demand: buying has been put off, and put off, and put off, until necessary things absolutely must be bought—or the feeling of too-tight living must be relieved at least a little.

The holidays are over.  The next few jobs and spending reports and consumer confidence readings will be interesting.

On the other hand,

If you believe that the continued fall in house prices—down in October for the 13th consecutive year-over-year decline—is more significant a harbinger than the recent modest pickup in sales, you also believe experts who guess that the bottom of the housing market will not be reached until 2015. That bodes ill for the jobs market….

If you believe that the recent spurt in consumer spending will prove unsustainable because it has come at the expense of savings…you believe the demand…will remain too weak to sustain [growth.]

See above re jobs and spending.

If you believe that the new round of regulations being readied by the Obama administration for the new year will frighten businesses, especially job-creating small businesses, you also believe that business investment is unlikely to provide much of a boost to the economy.

See above re jobs, and think about an ability to continue spending, even were a desire to do so present.

Stelzer then concludes, in keeping with the rump of the holidays, on an optimistic note:

…longer term the outlook brightens. America is still the world’s largest source of major innovations. It remains the home of risk-taking venture capitalists, deep and liquid securities markets, and a labor market so flexible that thousands can flee, and indeed are fleeing high-tax, regulation-heavy, union-ridden California for booming Texas. It is a safe haven for investors and the country of choice by immigrants.

But given the state of our educational system, for how much longer can we innovate?  Given the state of our economy, for how much longer can our jobs engine—small and medium businesses—afford to pay for innovation, or take risks involving innovation—or any other risks, come to that?  Given the present administration’s drumbeat of attacks on business—regulations Stelzer also mentions—for how much longer will small and medium businesses be willing even to try?  Given the present administration’s steady drumbeat of attacks on right to work states (vis., NLRB’s attack on South Carolina via its suit against Boeing for the miscreancy of wanting to build airplanes in that state), for how much longer will there be states that are sanctuaries for business, for innovation?  And he misses the fact that, in this economy, immigration is way down.

I’m not as sanguine about the coming year, or the years after, if we continue on our present course.

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