Peering into the New Year

Posted by admin on December 31, 2010 under Colorado, Government, Macro Economy | Be the First to Comment

We are encouraged by the economic prospects for 2011  — namely private sector job growth.  We do not see much improvement in the published unemployment rate and think the government sector could lose jobs.  The official unemployment rate will likely stay high as previously discouraged unemployed workers who quit looking for work return to the labor force and begin looking again.  So even if we have much better job growth, those people leaving the ranks of the unemployed for a new job will be replaced by people who return to the labor force seeking work after being discouraged.  In addition, we have lots of young people entering the labor force for the first time and in Colorado we have people moving here to at least enjoy the scenery while seeking better times.   

While the future looks promising relative to the recent past, the economy still has a long way to go.  Everyone seems to have lowered their expectations for a robust recovery and now realize that slow, but steady, is a decent outlook.  Inflation should remain low except in certain commodities where prices might be driven up by speculation as opposed to fundamentals.  If the developing economies, which have been leading the recovery, cool off, there will be less pressure on commodity prices. 

Watching the longer term debt markets and the world of politics will certainly be interesting in 2011 as investors and central banks continue to deal with the over leveraged public sector in the industrialized world with an even more watchful eye on the U.S. treasury, White House, and Congress which will begin sipping tea in the coming year.

In the meantime, have a good glass of wine and enjoy the last days of the holiday season.