Yes, I think we have a nice L shaped economy with modest GDP growth and modestly improving employment, so far mostly evidenced by the increased hours worked that you’ve been pointing out. Acceleration happens when/if some aspect of private sector credit growth takes off.
If euro solvency risks are indeed fading, it should be back to an ok market for stocks (which could have a large one time shift upwards to reflect the reduced euro risk), and low rates from the Fed until something changes.
Like Japan, the budget deficit may be large enough to keep it all from collapsing but not enough for the kind of growth that would trigger higher rates from the Fed.
Data off recent peaks but still firmly in expansion territory:
- “Component lead times are increasing sharply.” (Computer & Electronic Products)
- “Market had begun to change, but it is now declining again.” (Wood Products)
- “BP oil spill will impact business conditions over the next few months.” (Fabricated Metal Products)
- “The economy continues to be sluggish, with orders 8 percent to 10 percent below last year.” (Nonmetallic Mineral Products)
- “Retail sales are strong for both the domestic and international markets.” (Food, Beverage & Tobacco Products)
Unlike the US, Japan has been running a current account surplus.
True, long supported by dollar accumlation, which they pretty much ended with the Paulson talks which has in general resulted in the yen getting strong enough to slow their net exports. Same process that tends to drive the euro higher
And as this handy chart from a Martin Wolf column shows, if Japan’s current account surplus shrinks, so does its private sector savings.
That chart is gold, it clearly shows the relationship between govt deficits and non-govt savings. Funny how the sectors balance out for all those different countries. :o)