Nice Problems To Have

10/06/2011 at 5:22 pm

As markets resume a pattern of negative behaviour that has become familiar of late, one of the reasons cited remains slowing global growth. There are fears over growth problems in the US and in the developing world. From an outside perspective, however, some of these problems would be nice to have.

Take America. Yes, annualized quarterly growth in GDP fell to 1.8% in the first quarter from 3.1% at the end of 2010. But US GDP had already eclipsed its pre-recessionary peak by then (and so reached a further record high this year). That looks pretty good from a European or UK perspective – still 2% and 4% below peak GDP in real terms respectively. And let’s not mention Japan.

So, it’s no surprise that US employment – a lagging indicator of growth in any event, but one which receives a lot of attention and can affect confidence – turned the corner some time ago. The number of those claiming unemployment insurance is on its way to halving, having fallen from a peak of 6.6m in summer 2009 to 3.7m now. Payroll data shows the net creation of 1.8m jobs since the labour market bottomed in Q1 2010. Yes, there is some way to go before employment recovers its pre-crisis peak, but the country is some distance from a “jobless recovery”.

Turn to the developing world and growth fears look positively baffling. China began increasing interest rates last October, and resumed increasing banks’ reserve requirements at the beginning of 2010. The result for 2011 growth? 9.7% in real terms on the year to Q1, exactly in line with the average for the last ten years (though forecast to fall as far as a mere 9.3% for this year as a whole).

As ever, this is not to say that the world is a problem-free zone (whenever is it?) But clouds in the sky do not mean it is falling in.


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