Obviously, lots of people are worried, including the White House, Congress and the Fed. But others are not so gloomy. Consider some relatively more cheery assessments.
In a January 22 report titled “Dow 15,000,” Brian Wesbury, chief economist at First Trust Advisors L.P., wrote:
There is little to no sign of the kinds of economic imbalances that preceded past recessions. Inventory-to-sales ratios are razor thin. And during the past four years, businesses have invested a smaller share of their profits than during any four-year period since the 1960s. As a result, there is no massive overhang of plant and equipment investment like there was after the Y2K-related surge in 2000. Corporate profit margins remain high and labor compensation remains relatively low, meaning firms are still in a position to hire and bid up wages.
In addition, a January 25 CNBC.com story carries the title “Is the US Just Talking itself into a Recession?” said, in part, the following:
As Wall Street and Washington fret over what measures are needed to combat an economic downturn, there’s another debate brewing about whether the nation is talking itself into a recession when one neither exists at the moment nor is a foregone conclusion in the future…
Two big Wall Street firms began predicting a recession three weeks ago when government data showed the unemployment rate jumped to 5 percent in December. That rang recession alarms because the increase put the rate more than five-tenths above its low of the current economic cycle, which has traditionally served as the dividing line between growth and contraction. The Fed typically pays close attention to that recession barometer.
Subsequent government data has challenged – if not refuted -- that argument. Initial jobless claims this past week, for instance, showed that job losses were far below recession levels.
"If the job market remains as vibrant as the most recent data indicate, fears of recession will recede quickly, " said Nomura International chief economist David Resler, who has yet to be convinced a recession is underway or imminent.
Some industries will grow recession or not. The liquor industry expects their business to slow in 2008 due to the economy, but still grow. Reuters reported:
The distilled spirits industry expects its U.S. revenues to increase 4.6 percent in 2008, down from last year's growth rate, a trade group said Friday, as the weaker economy forces people to tighten their budgets for going out.
The Distilled Spirits Council of the United States (DISCUS) expects U.S. revenue to spirits makers to reach $19 billion in 2008. Revenue rose 5.6 percent to $18.2 billion in 2007. Sales by volume are expected to go up 1.9 percent in 2008, the trade group said, reaching 185 million 9-liter cases. Volume sales advanced 2.4 percent in 2007.
David Ozgo, DISCUS's chief economist, said he expects the economic slowdown to take a toll as people cut back on going out to restaurants and bars, but that the industry will outperform other areas of the economy. "Nobody is recession-proof," Ozgo said. "However there are a number of mitigating factors for us. We'll react to a recession, but it's not like we're the real estate industry or the auto industry ... where you would expect sales to go into the tank." Still, Ozgo said that even if people don't go out to drink, liquor is an "affordable luxury" they can have at home. "Maybe you can't go on the nice vacation you used to go on, but you can certainly buy a nice bottle of Scotch and enjoy it on the deck," Ozgo said.
The weekend is upon us, so happy or sad about the economy, how about a drink?
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