Economic and Business Commentary By Sean Lannan 9-3-10
Commentary on Economics, Markets and Politics to Aid Business Leaders Decision Making September 3, 2010 – Update Sean Lannan www.linkedin/in/SeanLannan About the author: Sean Lannan is a CFO for a high technology company. He has a background in corporate finance, treasury, investor relations, mergers & acquisitions and fixed-income securities trading, and has an MBA in finance and BA in economics and political science.
Commentary on Economics, Markets and Politics for Good Business Decision Making <ul><li>The jobless recovery is becoming a very big issue for politicians and will affect the outcome of the November elections. The Democrats are on the defensive since they are viewed as the incumbent political party responsible for doing something about the aftermath of the Financial Crisis (2007-9). </li></ul><ul><li>Corporate profits have rebounded strongly in the recovery. Future U.S. economic growth will depend upon an increase in corporate spending and investment and demand in emerging markets. </li></ul><ul><li>Uncertainty about taxes, government spending plans and Federal Reserve actions are making U.S. business executives cautious. </li></ul><ul><li>The U.S. housing sector remains a drag on the economy. </li></ul><ul><li>Corporate debt issuance has been strong in 2010 and will remain so with historically low rates available to investment-grade and non-investment grade borrowers. </li></ul><ul><li>Small companies still have very little access to credit while large and multinational companies can access non-bank sources of liquidity. </li></ul><ul><li>The IPO market is selectively open for issuers and risks remain high for issuers. </li></ul>
U.S. Growth Has Decelerated as Stimulus Spending Declines U.S. Consumers Start Saving More and Business Spending Rises Slowly <ul><li>The U.S. economic recovery looks like it is losing moment since the fourth quarter of 2009. </li></ul><ul><li>This has been a very weak recovery judged by prior business cycles after World War II. </li></ul>Q2: + 1.6%
Manufacturing Has Been Expanding Since Mid-2009 But Growth Has Been Weak Compared to Prior Economic Recoveries Jul: + 1.0% Aug: 56.3
Labor Markets Have Stabilized Over the Last Several Quarters But Do Not Show Much Improvement <ul><li>The comprehensive unemployment rate of marginally attached and involuntary part-time workers (called U-6 by the Dept. of Labor) is running at 16.7% in August. </li></ul><ul><li>More jobs have been lost in the most recent recession (over 7.5 million) than were created in the previous expansion – a first. </li></ul><ul><li>This appears to be the third relatively jobless recovery – a new pattern? The previous jobless recoveries were in the early 1990’s and early 2000’s. </li></ul><ul><li>Lack of job openings will keep consumer spending, housing and economic growth subdued. </li></ul>Aug: 9.6%
The Recession Destroyed Many Jobs, the Jobless Are Out Of Work Longer <ul><li>There has been almost no recovery of jobs lost from the recession and economic activity has been slow to recover. </li></ul><ul><li>The unemployed are staying unemployed longer (an average of 35 weeks) in this recovery. </li></ul>