Forget the Election and Get Ready for Another Year of Slow Growth
With high stakes politics currently demanding so much of our time and attention, it's easy to forget that a new year with the same old problems is only two months away. While many have argued that a change of leadership would also carry the burden of uncertainty with it, the other side has made the point that without change the economy will be in for four more mediocre years.
Either way, in just twelve short days, our political hyper-focus is all going to dry up and go away, leaving behind a cold economic reality in its wake that we, and the newly elected leaders will have to contend with.
"I think the election results do matter but I don't think we're going to get a whole lot of clarity on policy matters," says Jeff Cleveland, senior economist at Payden & Rygel in the attached video. "That leaves a lot of uncertainty, even after the election."
In fact, as he sees it, the real problem that is hurting our economy now, as it has been for months, is the fiscal cliff. Contrary to the belief held by many people, the impending combination of automated budget cuts and tax increases is not ''some sort of imagined future event," Cleveland says.
"We're already seeing big corporations sitting on their hands with regards to hiring and capex," he says.
The good news in all of this is that he is not calling for another recession next year, even though it may feel like it at times.
"There are a lot of things that are showing signs of life and not pointing to a recession," he says. "We're not seeing a recession in initial claims for unemployment insurance. We're actually seeing a little bit of a recovery here in things like housing and autos."
And who knows, maybe when we get our first look at Q3 GDP this Friday, which economists are expecting to rise to 1.9% from 1.3% in Q2, it might spur some excitement. Still, year-end fiscal cliff negotiations are apt to be full of drama.
"Corporations want to wait and see what the rules will be in 2013 and beyond," Cleveland says, "then they can make some decisions on hiring and business spending."
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