In a keynote presentation in Las Vegas, David Kelly of JP Morgan Chase addressed an audience of financial advisors. His presentation provided a cautious optimism about our economic growth for 2011. The current economic recovery has been slow by historical standards. Usually, economic growth roars back after a deep recession, but the latest numbers show a 3.2% (annualized) expansion of US economy in the fourth quarter. Going forward, the question in Kelly’s mind is whether 2011 will see us reach 4% growth – the level where we begin to create enough jobs to start reducing the unemployment rate. Kelly noted several possible reasons to think we can. He noted technology purchases having been put off, and now being a tax write off, most likely will spike in 2011. Auto sales managed to increase all the way to 12.5 million units last year. Housing demand may be on the verge of an increase as well. Consumer balance sheets are looking better as mortgage debt is being refinanced at historically low levels. Corporate profits are improving because this economy holds down interest rates and keeps labor expenses in check. Kelly says that adding all this together, it isn’t a stretch to expect 4% growth in 2011.
That would reduce unemployment, right? Yes and no. The higher economic growth rate should lead to rises in job creation. But Kelly said that the 9.4% unemployment rate we see today doesn’t count people who have stopped looking for work. If you have children, friends or neighbors who are looking for work, Kelly had some good news for them. When you see that employment grew by 800,000, as it did last year, most people don’t realize that’s a net number. Kelly invited the audience to go to the web site www.bls.gov, and look at the “Job Openings and Labor Turnover Report.” You’ll find that last year 50.8 million people were hired, while 50 million people left the work force. “People don’t realize how dynamic our labor market really is,” said Kelly. “That means that there are 50 million resumes on various desks around the economy, and the top resumes on those piles are going to get hired this week. There are jobs out there, and a lot of people are hired in America every day.”