Thursday, February 4, 2010


Edward Harrison at Credit Writedowns offers insightful analysis of the economy. I follow his blog. Here is what he has to say about the current inventory cycyle and anemic hiring:
"...I believe the U.S. economy is more fragile than policy makers would have us believe. In particular, I see rising jobless claims, anaemic hiring trends and looming state budget cuts as headwinds which will have a lot of implications by mid-year.

Moreover, just as the Federal Reserve has signalled an end to its purchases of mortgage backed securities, we are now beginning to see the signs of a second but larger wave of Alt-A and Prime mortgage defaults, many of them strategic...

...consumer spending will remain weak...

...The long and short is that – come Summer – the inventory cycle’s thrust will have dissipated. And if companies are not hiring by this time and consumer spending is not increasing more robustly, then the state budgets, the strategic defaults and all of the rest of that becomes a serious obstacle. In my view, more likely than not, this will lead to another recession late in 2010 or in 2011. And nothing in the President’s budget changes this outlook."

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