October 5, 2011

Wesbury Slams Roubini on ‘Double Dip’ Fears

First Trust chief economist says mood doesn’t match facts

Economist Nouriel Roubini speaking in September. (Photo: AP) Economist Nouriel Roubini speaking in September. (Photo: AP)

The country’s dour mood doesn’t jibe with the numbers, according to First Trust Chief Economist Brian Wesbury, and he specifically points to Nouriel Roubini’s recent analysis as an example of what not to believe.  

“Recession fears have been on the rise,” Wesbury writes in commentary released Monday. “But, the facts don’t back up all these fears. The economy is not contracting.”

He notes Roubini also predicted recession in 2009 and 2010 to no avail.

“Roubini is worried about debt and Europe,” he writes. “The Economic Cycle Research Institute (ECRI) claims the US is already ‘tipping into’ a double-dip. The ECRI has a proprietary model, so we don’t really know why they are so negative. Many investors are willing to believe in these forecasts, because confidence has declined.”

While Europe faces daunting problems, Wesbury believes the United States will not dip into recession and purchasing manager’s surveys will bounce back.

“This appears to be happening now,” he notes. “The Chicago PMI for September rose to 60.4 and the ISM-manufacturing index for the U.S. rose to 51.6. We do not live and die by these numbers, we think they sometimes measure confidence and can be misleading, especially when emotions are so volatile.”

Wesbury goes on to list a number of “facts” to back his assertion, including: 

  • Initial unemployment claims fell 37,000 last week to 391,000, the lowest level in six months. The Labor Department said the drop was due to problems seasonally adjusting the data, but that explanation is lacking. Unadjusted data show claims were 325,000 last week, the lowest level since May 2008 and well below the 373,000 in the same week last year. 
  • Same-store chain store sales are still consistently above year-ago levels (4.2% according to Redbook Research and 2.7% according to the International Council of Shopping Centers). Rail traffic is up 3.8% from a year ago while hotel occupancy is up 4.1%. And all this data is from the third week of September. Car and truck sales in September are also expected to rise significantly from August.  
  • Yes, employment growth was flat (a whopping zero) in August, but the Verizon strike ended, and right now we expect a 105,000 gain in September private sector payrolls.

“None of these numbers are consistent with a recession,” he concludes. “Yes, forecasts and confidence are down, but recessions don’t happen when the Fed is easy, unless there is a panic. Today, the US is not experiencing a panic–that’s what the facts show.”

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