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SchizophrEconomics – Part I

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In economics, sometimes it’s ok to say “I’m not sure…”

The broader economic story is normally more clear at this point in the business cycle. When we can tell a consistent story, we feel more confident in state and community planning, revenue forecasting, and even in our own personal finances. This feels different though. Growth has generally become stronger, especially in Arizona. Yet, uncertainty in a number of key analytical areas makes it tough to evaluate conditions. The last month posted solid job creation numbers across the U.S., while the previous months showed a very clear downward trend. The stock market is up, but more than the fundamentals will allow over a longer period of time and we might see a correction soon. The Fed is desperate to raise rates but can’t put together the needed economic story either… we could keep this up all day.

The point: very little is following a predictable pattern. Despite recent positive news, uncertainty a year or two down the road is high. Previous relationships between economic numbers and what might happen next do not exist like before.

This uncertainty is prevalent in the following video clip of Robert Shiller discussing the housing market. Remember, the problem isn’t what we don’t know; it’s what we think we know but is incorrect. The best advice? Try to not overly rely on one or two individual reports about economic conditions, good or bad; and know that anybody using words like “certain” is likely trying to sell something.

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JimRounds

Post by: Jim Rounds

 

 

 

 

 

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