Wesbury Sees Creative Destruction, Not Market Gloom: Tom Keene

Wesbury Sees Creative Destruction,
Not Market Gloom: Tom Keene

By Mary Childs and Tom Keene

Aug. 25 (Bloomberg) -- The U.S. economy won’t slide back into recession if companies selling new technologies create jobs and the Federal Reserve maintains an “accommodative” monetary policy, according to Brian Wesbury, chief economist at First Trust Portfolios LP in Wheaton, Illinois.

“The economy’s not going to have a double dip,” Wesbury said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “What we need is the creative side of the creative destruction. We’re getting the destruction of jobs due to productivity. What we need is the creation.”

During the Industrial Revolution, government was small and manufacturing positions were created as jobs were lost on farms, according to Wesbury. Today, such devices as Apple Inc.’s iPad and Motorola Inc.’s Droid will help propel growth and create jobs, he said.

“We’re going to now, in the next decade, see this morph and change our world dramatically,” he said. “We’re in the hot spot, we’re not in the decline.”

U.S. stocks fell for a fifth straight day as reports from the Commerce Department showed new-home sales slid last month to a record low and durable-goods orders increased less than forecast, casting doubt on the U.S. economic recovery. The yield on the 10-year Treasury note touched a 19-month low.

Sales of existing homes plunged by a record 27 percent in July as the effects of a government tax credit waned, the National Association of Realtors reported yesterday.

According to Wesbury, this week’s housing reports don’t indicate the world’s largest economy is doomed.

‘Totally Ingenuous’

“I’m surprised we had any sales at all in July,” Wesbury said. “It’s totally disingenuous for people to look at that number and argue it’s somehow an underlying proof of a weak economy. We just lost one of the biggest supports of housing that we’ve ever had as a nation, so of course they fell.”

On March 9, Wesbury forecast that the U.S. economy may have added 300,000 jobs that month. Payrolls rose by 208,000, according to Labor Department figures.

Employers eliminated 131,000 positions in July after a revised reduction of 221,000 in the previous month, the Labor Department reported Aug. 6. The U.S. unemployment rate stayed at 9.5 percent.

Grandpa

Creative Destruction occurs when CNBC's favorite permabull mixes shrooms and kool-aid.


October 11, 2009
Brian Wesbury Op-Ed piece in WSJ


When it comes to the economy and financial markets, good news has far outweighed bad news in 2009. Just about every piece of economic and financial market data is tracing out a V-shaped recovery.


Many fear a W-shaped economy, otherwise known as a double-dip recession. These fears are overblown. Grandpa: we do not fear a shape Brian, however your permabull stance is rather scary.


By nearly every measure, the economy is tracing out a V-shaped recovery. The pouting pundits of pessimism say that people aren't spending, but retail sales (excluding autos) are up at a 3.9% annual rate so far this year versus double-digit declines late last year. Manufacturing has turned the corner (the ISM Manufacturing Index has been above 50 for two straight months), imports and exports are bouncing back, commodity prices are up significantly, and real GDP is set for a solid gains of 3%-4%. Grandpa: V-shaped recovery? 2009 Q4 GDP was 5.0% while 2010 Q2 was just revised to 1.6%. We are back to 2009 Q3 GDP levels so you might review your recovery consonants.


Housing has turned the corner as well. After bottoming in January, new home sales are up 58% at an annual rate. Housing starts have also bottomed, housing inventories have plummeted, and home prices are on the rise. Grandpa: creative destruction occurs again, 6.09 million seasonally ajusted existing home sales in October 2009 and 3.83 million in July 2010. "Turned the corner"?? Existing home sales DOWN 37% nine months after your op-ed piece. Inventory of existing homes for July was 12.5 months versus 7 months in October 2009.


Yes, unemployment rose to a new high of 9.8% in September. But the U.S. was losing 700,000 private-sector jobs per month at the beginning of the year and has seen that monthly total shrink consistently ever since to an average of 196,000 in August and September. There was a one-month hiccup in June, when job losses accelerated, and then another hiccup in September. But the trend is clear, and smaller job losses will give way to job gains. Grandpa: during the first 3 weeks of August 2010, weekly initial jobless claims have averaged 488,000...HELLO!!


Jobs are always a lagging indicator, but there are three other contributing factors to the current lackluster jobs numbers. First, CEOs are skeptical of the recovery and tentative about hiring. And productivity is allowing more production with fewer workers. But productivity can only hold off new hiring for so long. With inventories at rock-bottom levels, consumer spending on the rebound and profit-margins wide, job growth should expand sharply in the quarters ahead. Expect positive job growth in late 2009 or early 2010. Grandpa: see above and for the record, July and August 2010 data is not deemed early 2010...




Brian's complete shroom and kool-aid op-ed