My New Blog

The New Year is here. Of course, now we are inundated with predictions regarding what will happen in the coming year. If you read 100 predictions, you would get 100 different scenarios. For example, in October Fannie Mae predicted that rates on home loans would fall in the first half of next year, while Freddie Mac forecasted an increase in rates. In addition, Fannie Mae Chief Economist Doug Duncan rated the chance of a recession at 40% next year while Freddie Mac predicts that economic growth will likely strengthen to about 2.5% in 2012. More recently, a survey of 20 top economists conducted by CNN/Money predicted the risk of a recession next year at only 20% next year. This survey expected the fourth quarter growth rate to be the strongest of the year with over a 3.0% growth rate, but grow to slow to an annual rate of 2.4% next year.

Slow growth next year but no new recession? Sounds like a replay of this year. Our advice? Don't get lost in predictions. Most of the time they are a reflection of what already has happened. Right now we have very positive trends with increased consumer confidence confirmed by the Conference Board's survey released last week. The two month increase was the largest such bounce since March of 1991 and brought the level of confidence to where it was this spring. The real question is, will these trends continue into next year or do we fall back into our "starts and stops" pattern of economic recovery? If you want a clue to that question, watch the employment trends. A stronger, permanent recovery only comes with an improving employment sector and the reading on employment this Friday will be an important indication in this regard.