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The Chinese Economy is On a Slowing Boat
James Finnan

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May 12
2011

The economy's new norm

Posted by Stephen Taub in recessioninflationeconomyeconomic growthCash

Stephen Taub

Is the economy steadily improving or is it at risk to slip back into a recession? Is inflation about to take off or are its fears unfounded?

The answer to these questions is debated daily, depending upon the published stat du jour.

Wholesale, consumer prices and commodities prices are rising, suggesting higher inflation. However, wages are not taking off yet and housing is still depressed. No inflation fears there.

Corporate profits are surging at rapid clips and cash on balance sheets is near records. However, a big portion of the gains is due to cost cutting. And the jobs picture has not improved enough to make people more hopeful.

When will we finally see a discernible trend? It may take years.

Rather, financial execs, economists and the average person in the street should get used to this New Normal, where every day we get a new metric that seemingly contradicts the previous one.

This is what is called a choppy economy. Good news one day, bad news the next, and on and on this pattern this.

Of course, it is hard to plan in this kind of environment. And this probably best explains why most companies are not ramping up hiring plans. If they can't get a good feel for the near or long-term future, how can they take action to plan for it?

So, they sit on their Help Wanted signs, for fear of jumping the gun, only to set in motion layoffs shortly afterward. And every executive will tell you it is much easier to hire someone to fire someone.

Get used to this pattern. We'll probably experience it for a number of years.

 

 

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