So the known pattern is that expanding economy brings reduction of Unemployment and increase in Inflation.
2011 has broken that pattern.
US economy is stagnant [around 1% growth], Inflation is rising [the table from Inflation Data provides 10 years data ] and Unemployment too is rising [in fact it is already close to 2009 figure]
Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Ave |
2011 | 1.63% | 2.11% | 2.68% | 3.16% | 3.57% | 3.56% | 3.63% | NA | NA | NA | NA | NA | NA |
2010 | 2.63% | 2.14% | 2.31% | 2.24% | 2.02% | 1.05% | 1.24% | 1.15% | 1.14% | 1.17% | 1.14% | 1.50% | 1.64% |
2009 | 0.03% | 0.24% | -0.38% | -0.74% | -1.28% | -1.43% | -2.10% | -1.48% | -1.29% | -0.18% | 1.84% | 2.72% | -0.34% |
2008 | 4.28% | 4.03% | 3.98% | 3.94% | 4.18% | 5.02% | 5.60% | 5.37% | 4.94% | 3.66% | 1.07% | 0.09% | 3.85% |
2007 | 2.08% | 2.42% | 2.78% | 2.57% | 2.69% | 2.69% | 2.36% | 1.97% | 2.76% | 3.54% | 4.31% | 4.08% | 2.85% |
2006 | 3.99% | 3.60% | 3.36% | 3.55% | 4.17% | 4.32% | 4.15% | 3.82% | 2.06% | 1.31% | 1.97% | 2.54% | 3.24% |
2005 | 2.97% | 3.01% | 3.15% | 3.51% | 2.80% | 2.53% | 3.17% | 3.64% | 4.69% | 4.35% | 3.46% | 3.42% | 3.39% |
2004 | 1.93% | 1.69% | 1.74% | 2.29% | 3.05% | 3.27% | 2.99% | 2.65% | 2.54% | 3.19% | 3.52% | 3.26% | 2.68% |
2003 | 2.60% | 2.98% | 3.02% | 2.22% | 2.06% | 2.11% | 2.11% | 2.16% | 2.32% | 2.04% | 1.77% | 1.88% | 2.27% |
2002 | 1.14% | 1.14% | 1.48% | 1.64% | 1.18% | 1.07% | 1.46% | 1.80% | 1.51% | 2.03% | 2.20% | 2.38% | 1.59% |
2001 | 3.73% | 3.53% | 2.92% | 3.27% | 3.62% | 3.25% | 2.72% | 2.72% | 2.65% | 2.13% | 1.90% | 1.55% | 2.83% |
2000 | 2.74% | 3.22% | 3.76% | 3.07% | 3.19% | 3.73% | 3.66% | 3.41% | 3.45% | 3.45% | 3.45% | 3.39% | 3.38% |
Note: Red indicates Deflation, NA indicates data not yet released. | |||||||||||||
 |
| US Unemployment Rate [source: http://www.forecasts.org/unemploy.htm] |
Experts warn that these data mean higher taxes, cut in entitlement and welfare schemes and erosion of value of US dollar and treasury bonds. Taxes did not increase yet, but cuts are coming in. Downgrade of S&P credit rating to AA+ already impacted dollar price in international market. Another effect that people are wary of is rise of Fed interest rate. If the economy and inflation continue the same trajectory, to retain investor's interest, Govt. may be forced to increase Fed interest rate.
Now question is this: will you trust these prediction from experts and worry to high BP, sleeplessness, stress, more visits to your therapist and finally reduced life-span? Or will you leave everything to your fate and enjoy your morning coffee and newspaper?
For those who belong to first category, Scientific American has an interesting story to tell. They cite a 'study in the journal Economics and Portfolio Strategy that tracked 452 managed funds from 1990 to 2009, finding that only 13 beat the market average.' They argue that Financial prediction always fails and no one can make a realistic prediction. Economics Nobel laureate Paul Samuelson long ago noted in a 1966 Newsweek column: “Commentators quote economic studies alleging that market downturns predicted four out of the last five recessions. That is an understatement. Wall Street indexes predicted nine out of the last five recessions!” Quoting the article, "The world is a messy, complex and contingent place with countless intervening variables and confounding factors, which our brains are not equipped to evaluate." and therefore expert predictions fare 'little better than “a dart-throwing chimpanzee.” '
Dan Gardner's recent book, named Future Babble where he argued why prediction about future disastrously fails and why experts still make predictions and why we still believe in those prediction, could be a good stress buster if you are still worried.
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