Yesterday, I noted that I see "muddling" growth of around 2% in the second half of the year, due to a variety of factors. Here I will outline various benchmarks that I need to see in order to reverse that prediction.
1.) Employment growth is a must. Initial claims have to move below 400,000 for a sustained period, and private sector job growth must begin to print in the 150,000/175,000 range. One of the primary reasons for low levels of consumer confidence is the unemployment situation. If the buying public sees consistent improvement in these numbers, we can expect some improvement in sentiment, which will lead to an increase in consumption.
2.) Emerging economies have to move to a growth oriented footing -- or at least move onto a neutral footing. Starting about six months ago, China started hitting the breaks on their economy. Brazil and India followed suit in short order. As I pointed out yesterday, Brazil now has an inverted yield curve and India's is flattening. As these economies are the prime drivers of growth, they have to return to a more growth oriented mode. Unfortunately, the reason for the rate increases is respective domestic inflationary pressures, which means we probably won't see rate decreases in the near future.
3.) Washington has to move away from its austerity obsession and look at creating jobs. We've been over the infrastructure argument half a million times, but it bears repeating. Half of those currently unemployed are construction and manufacturing employees. An infrastructure program would get those people employed. If you don't want to float government debt for it, repatriate overseas corporate profit and use some of the funds to open an infrastructure bank. An no -- austerity does not lead to growth.
