Uncharted waters: growth without jobs,
amid financial wreckage
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Bill Cheney -
Chief Economist
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We forecast a robust economic recovery, as job growth will drive incomes and consumer spending, which in turn fuel a resurgence of business investment. The process of rebuilding inventories, which pushed GDP growth to almost 6% in Q4 2009, is not over yet.
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In addition, more than half of last year’s stimulus package is still to come, while a synchronized global expansion is boosting exports.
But this is not the whole story. Another wave of mortgage defaults and foreclosures threatens renewed declines in home prices, while commercial real estate seems on the verge of a major slump. More losses for banks would only make a constrained lending environment even worse, potentially limiting the normal growth of spending.
It's all about jobs
The job market is critical. Without job gains, consumers’ moods will remain bleak and, even with increased hours or wages, consumer spending could be anemic. Rising employment will be the chief driver of any recovery in housing and commercial real estate, while the job market will also be critical for Federal Reserve policy, as any tightening moves will depend on a sustained downtrend in the unemployment rate. Last, but not least, job growth may be the decisive factor in the mid-term elections.
We believe that substantial job gains are just around the corner. Employers have cut 6% of jobs since the onset of recession, while GDP fell only 3.8% peak to trough, and the resulting record productivity growth does not appear sustainable. But the paradox of growth without jobs could be resolved by revisions showing lower growth, or it could turn out to be a real transformation caused by ever-wider adoption of labor-saving technologies. Job growth is not guaranteed.
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| Bill Cheney |
Oscar Gonzalez |
Chief Economist
MFC Global Investment Management
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Economist
MFC Global Investment Management
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MFC Global Investment Management
MFC Global Investment Management® (MFC GIM) is the asset management division of Manulife Financial. The MFC GIM diversied group of companies and affiliates provide comprehensive asset management solutions for institutional investors, investment funds and individuals in key markets around the world. This investment expertise extends across a full range of asset classes including equity, fixed income and alternative investments such as oil & gas, real estate, timber, farmland, as well as asset allocation strategies. MFC GIM has investment offices in the United States, Canada, the United Kingdom, Japan, Hong Kong, and throughout Asia.
The information contained herein is based on sources believed to be reliable, but it is neither all-inclusive nor guaranteed by MFC GIM. Opinions and forecasts reflect our judgment at the time of publication and are subject to change.
This commentary is provided for informational purposes only and the opinions expressed in this commentary of those of the author and MFC Global Investment Management and not necessarily those of John Hancock Funds, LLC. MFG Global Investment Management and John Hancock Funds, LLC are affiliated companies.