Sung Sohn
Sung Sohn
Sung Won Sohnis a Korean American economist, noted for his skill in economic forecasting. He is currently the Martin V. Smith Professor of Economics at California State University, Channel Islands...
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Businesses have regained confidence in the sustainability of this economic expansion and have started to hire people in earnest. Employers are trying to boost employment by adding more workers, not more hours per worker.
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But give people more information, and we can incorporate it into our thinking process. We can attach and assign probabilities and then more or less go on with our normal lives. I think that's exactly what's unfolding.
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It boils down to housing affordability; mortgage rates have risen, but they're still historically very low, ... We're continuing to see people who had been sitting on the fence jumping in to take advantage of these low rates before they go back up.
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But if things start to go wrong -- if business spending doesn't pick up, or state and local governments lay off more people than anticipated, or auto sales fall off, or interest rates go much higher -- then a combination of these factors would really affect the economy going forward.
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Once the Fed starts raising rates, I suspect they might go up more rapidly than a lot of people realize. Many of us think the Fed will do things slowly and gradually. In fact, they usually do things pretty quickly.
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I don't think businesses will hire more people in anticipation of higher demand. They want to see demand first. They feel they have the flexibility to increase production without hiring people.
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How so many people went so far astray from the mainstream and were wrong is probably unprecedented,
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I'm not bullish on the holiday shopping season, but I'm not as bearish as some people have been.
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The economy continues to grow with fewer people working. How long can we squeeze juice out of this orange? Not indefinitely. Sooner or later economic growth would suffer.
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And now that the economy is improving, people have greater confidence to make purchases and build homes.
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Crowding out could become a distinct possibility in the future, pushing up interest rates significantly in 2005 and beyond,
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Argentina is not a potential nightmare. It's a relatively small economy compared to Mexico and Brazil.
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Employment gains really haven't come from full-time workers. They're coming primarily from part-time, temporary help, ... Businesses are still trying to maintain flexibility by not hiring more expensive, full-time workers. That might be one of the reasons why we're seeing an increase in continued claims.
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Employment gains are rising at a slower rate, retail sales are decelerating somewhat, the stock market is going through some turmoil and the Middle East situation is also probably having a dampening impact on consumers' willingness to spend, ... So I think the Michigan confidence report is consistent with an overall picture in which consumers are doing well, but probably taking a breather for a while.