New Years Prediction #2: Unemployment Falls to 8%, GDP Grows

by Louis Navellier | January 2, 2012 6:59 am

New Years Prediction #2: Unemployment Falls to 8%, GDP Grows

As I hinted in my New Years Prediction #1[1], 2012 will be the year of the U.S. recovery. Throughout 2011 we knew we were in for a very slow economic recovery and that jobs would continue to be the last indicator to show significant progress. While I still think this will be the case in the New Year, I do expect we’ll cross a major threshold that will be a boon for the recovery.

Recently, we’ve seen some very good news on the jobs front. While not every statistic has been outstanding, employers reported that they took on 120,000 workers in November. Better yet, the Labor Department’s household survey — which targets those not covered by the payroll survey (like contract and temp workers) — reported that 278,000 more people were employed last month. So, while the household survey continues to show more jobs than the payroll survey by over 2-to-1, both are showing growth.

In fact, the explosion of jobs in the household survey has been the strongest since 2006 and bodes well for more payroll jobs. The November unemployment rate fell from 9% to 8.6%. Looking forward, I expect payrolls to continue to gain ground, with an average of 150,000 jobs created per month in 2012. By the time the November presidential election rolls around, I expect the unemployment rate to fall to 8%. This would be significant, but attainable progress.

We’ve also experienced a remarkable shift in consumer sentiment, which has fueled higher consumer spending. After months of depressed sentiment, something clicked with consumers, and October consumer confidence rose the most in eight years! Coincidentally, each consumer spent 9.1% more during Thanksgiving weekend[2] than last year. As Christmas approaches, the shopping centers remain more jam-packed than ever, and I expect this steady spending to carry over into the New Year.

But perhaps most important, I expect the nation’s gross domestic product (GDP), the broadest measure of activity, to continue to accelerate. Fourth-quarter GDP is already approaching 3% (or even possibly 4%) growth, thanks to the powerful forces of robust consumer spending, inventory building, less government intervention and an improving trade deficit. All of these factors will continue to be at work in 2012, and I expect we’ll see continued improvements in U.S. GDP in the year ahead.

New Year’s Prediction #3: Finance, the Worst Sector of 2012[3]

Endnotes:
  1. New Years Prediction #1: http://investorplace.com/2012/01/new-years-prediction-corporate-america-borrows-smart/
  2. Thanksgiving weekend: http://investorplace.com/2011/11/black-friday-retail-stocks-shld-aapl-bby-amzn/
  3. New Year’s Prediction #3: Finance, the Worst Sector of 2012: http://investorplace.com/2012/01/new-years-prediction-financials-worst-sector-2012-bac-c-etfc-gs-jef-ozm/

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