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Dr. Chris Kuehl
Author of Fabrinomics
a new employee are not generally available, and there is a shortage of qualified
workers. Many people are looking for work, but they are not generally hirable.
Back to the negative: the second concern. Any given economic year has ups and
downs, and we will have our share in 2016. Adjustments will be made to the new
rates, and there will be some market swoons.
All this is to be expected, and most of it will be
anticipated. The part that will not be as predictable
is the political season. This has been an
intensely partisan campaign already and
vicious. The business community is as worried
as it can be as it has no idea what to expect. The
economy has barely been talked up thus far, and
few policies seem to be in place. The uncertainty factor will loom large this year,
and that will stall decision-making. This will result in a very slow start to the year.
Now for the closing reference and one that is more positive than not. The economy
has clear untapped potential, and there are reasons to think this will unlock
sooner rather than later. Corporations have been hanging on to their cash, and
banks have been holding on to their money because the corporations are not
in the mood to spend. Consumers have a lot of cash as well, and they have
larger balances on their credit cards than in the past. There is money to spend
when and if there is a desire to do so. The catch is that nobody quite knows
how to dislodge it. Most of the motivations for consumer spending are now in
the past (and Christmas was not great). The corporate community is doing more
merger and acquisition, but thus far it has been for tactical reasons rather than
to boost growth. The point is, 2016 has the potential to be good if spending
starts to unlock.
Each year there is a kind of inexorable pull for the economist; it is necessary to
make assessments of the coming year as if there was something magical about
new numbers at the end of the date. In truth, little or nothing is significant about
moving from December to January, and in fact far more significant economic
transitions were scattered throughout the year. Be that as it may, we are all
compelled to prognosticate, and many dutifully read these scribblings as they
seem to conveniently forget what a hash we made of those forecasts last year. Go
back and read what we said about 2015 at the end of 2014. It wasn’t supposed
to be like this.
So now we are facing another year and we have another set of expectations. Will
this be the breakout year for the economy we thought we would see in 2015,
or will it be another draggy year that has us looking forward to 2017 already? In
classic econo-speak, I can assure you it will be both.
Right now there are two positive developments to look forward to and two that
will not be so positive. The most threatening aspect of the coming year will be
the strength of the dollar. This has been a major issue in 2015 but stands to get
much worse in 2016 as the Federal Reserve has finally started to raise rates.
The dollar had been gaining strength even without the help of higher interest
rates, and now investors will have even more incentive to acquire greenbacks.
In truth, it is almost a misnomer to assert the dollar has gained strength — it
is really a case of the other currencies losing strength. It is also a mistake to
assert the dollar strength is bad or good — it all depends on which side of the
equation one is viewing it from. Those that are trying to export or are competing
with companies in countries with a weaker currency are negatively affected, but
those that are importing are pleased, and consumers are pretty happy with the
lower price of imports.
The first positive development revolves around jobs. There have been some
steady gains in the last couple of years, and the economy will begin the year with
an official unemployment rate of 5 percent and even a U- 6 rate that is under 10
percent. The number of job openings has not been this high since the start of the
recession. Even the quit rate is trending back toward normal.
There are some caveats, though. The first is that too many of the new jobs created
in the last year or so are not very good or steady; many are in the service sector,
and the low-paid part at that. The other issue is one that has been very familiar
to those in manufacturing, construction, or transportation. The skills needed in
This will result
in a very slow
start to the
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