QandO

February 11, 2004

Job gain on the horizon?
Posted by McQ

Per Alan Greenspan, yes:

``Overall, the economy has made impressive gains in output and real incomes; however progress in creating jobs has been limited,'' Greenspan told the committee.

But even in the jobs area, Greenspan held out hopes for an improvement in coming months as continued strong GDP growth makes businesses more confident about hiring back laid-off workers.

``As managers become more confident in the durability of the expansion, firms will surely once again add to their payrolls,'' Greenspan said.

However. There's ALWAYS a "however" ...

Greenspan cautions there are two things which could derail the economic growth and consequently any job growth (not to mention the political toll such a catastrophe would bring).

Among the risks he listed were a sharp increase in oil and natural gas prices and the possibility that investors will become spooked by the soaring budget deficit

The defiicit is “among us” as has been noted constantly in the last few weeks and OPEC, as noted here by Jon, is going to cut production by 10% which should lead to a worldwide price increase.

The bet here is we’ll see some high level contacts with OPEC attempting to forestall the decrease in production (or some new feelers put out to non-OPEC nations as an alternate means of forestalling the price increase).

As for the deficit, Greenspan makes clear the danger of increasing debt:

``Given the already substantial accumulation of dollar-denominated debt, foreign investors, both private and official, may become less willing to absorb ever-growing claims on U.S. residents,'' Greenspan said.

And if Greenspan’s warning comes to pass?

Many private economists are concerned that if foreigners suddenly become spooked and start dumping their U.S. holdings, stock prices could plunge and interest rates soar.

Result? Dead recovery, loss of jobs, and, for the Republicans, loss of at least the White House.

Time for the drunken sailors to sober up.

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