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Jobs, debt, cuts all work against an economic recovery

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BOB MOON: Let’s get Richard DeKaser’s take on why the street is where it is this morning. He’s with the Parthenon Group, a Boston-based management consulting firm.> Richard, we saw that big plunge for the Dow yesterday, this morning we’re starting out I’ll say tentatively — what’s going on here?

RICHARD DEKASER: Well, you hit the nail on the head, Bob. It is the economy, not just that we had a couple of bad turns this week. But over the past month the broad market is down over seven percent — that’s not good. Now, the famous economist Paul Samuelson once said that the stock market has a tendency to over predict, predicting five of the last nine — nine of the last five recessions is the way he once put it. So, it’s not a perfect indicator, but the numbers have been really bad. And in particular, last week, the government told us the economy was growing much more slowly than we thought. Instead of two-and-a-half percent over the past year, the actual number was like one-and-a-half percent. That puts us below this very important two percent threshold which is required to create jobs. And, technically some would refer to where we are right now as already in a growth-recession. A growing economy, but not fast enough to drive the unemployment rate down.

MOON: Jobs — what about these mixed employment signals here this morning?

DEKASER: Well, they kind of continue the drum beat. According to ADP 114,000 private sector jobs — if the true number we get on Friday come in at that territory, we should also layer in another 30,000 or so government job losses, which has been the trend over the past year. That’s well over 100,000. We need to be under 100,000. We need to be doing two or three times that rate to drive the unemployment rate downward, and that’s just not where we’re at.

MOON: Quickly, too early to be talking recession here?

DEKASER: I don’t think so — I think that one in three probability that Larry Summers mentioned is a very good prognostication, but that’s kind of scary. You know, 30 or 40 percent chance is very hard.

MOON: Richard DeKaser at Parthenon Group. Thanks

DEKASER: My pleasure.

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