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June 15, 2024
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A little less uncertainty and a little more growth, from David Rosenthal


Friends and Colleagues,

After two years of economic madness, our friends at Wells Fargo Securities (WFS) currently are projecting “a little less uncertainty and a little more growth”. While nothing seems to happen quickly these days, at least there is a hint of optimism in the air. Read on to see the specifics behind the WFS projection.

WFS Comments on the Political Front:

• Republican gains in Congress increase the odds of tax cuts being extended.
• They also imply a slower pace of regulation.
• Efforts to repeal or scale back healthcare reform and financial regulation will likely soften some key provisions in both. Overturning enacted laws will prove extremely difficult.
• Success of the Tea Party on Election Day should lead to more fiscal restraint, which may help curb the budget deficit but will also restrain government spending.
• The Fed’s announced plan to expand its balance sheet by $600 billion by purchasing Treasury notes sent commodity prices soaring.
• It also stirred up a firestorm overseas, just ahead of the G-20 meeting.
• The resulting harsh criticism will make it more difficult for the Fed to do additional quantitative easing.

Good News - Employment Reports Look Optimistic

• October’s employment numbers were stronger than expected, with private-sector payrolls rising by 159,000 jobs.
• Private-sector employers have added more than 100,000 jobs during each of the past 4 months and have added jobs in 11 of the past 12 months.
• Job gains have been fairly broad based, hours worked have increased and hiring in temporary services has turned up.
• WFS projects that hiring should remain solid in the months to come.
• WFS has raised their expectations for 2011 job growth to an average of 135,000 new jobs per month, up from 91,000 in 2010.

Bad News - Continuing High Unemployment

Continuing high long-term unemployment remains a drag on economic growth.

• The average duration of unemployment is 33.9 weeks.
• The median duration of unemployment is 21.2 weeks.
• Layoffs remain way too high; recent weekly first-time unemployment claims were ~ 450,000.

Mixed News - Consumer Spending and Housing

WFS projects improvement in consumer spending and housing, but these recoveries will be constrained by high unemployment.

• WFS projects consumer spending to rise 2.1% in 2011, up from 1.7% in 2010.
• They also project home sales and new home construction will improve, but disposition of foreclosed properties could delay a full recovery until late 2011.


Given the Fed’s massive stimulus program, WFS contends that worries about inflation are understandable but a bit premature.

• An immediate impact of the recent quantitative easing was to weaken the dollar against other major currencies and raise commodity prices.
• WFS projects that higher commodity prices will boost the Producer Price Index but should have less of an impact at the consumer level.
• They contend that demand is not strong enough for businesses to pass their higher costs on to consumers.
• The result is tighter profit margins for consumer products companies.
• As a result, WFS says companies will have to find new ways to cut costs, which will limit hiring, capital investment and spending.

Overall, some reasons to be optimistic, tempered with some stark realities that remain a drag on recovery and growth.

As always, our saga continues, so stay tuned……


“Us” and “Them”

When we share something in common with others, we connect with them. Same college…same fraternity…same hometown…same religion…same political beliefs… All of these breed familiarity and can create a sense of “us”… “our” people.

On the flip side, those who are different too often become “them”. We learn to put up barriers to “them” because they are not like “us”. We distrust them…we speak ill of them…we tell jokes about them…we keep them out of our clubs and our schools and our neighborhoods.

But why must we live in a world of “us” and “them”? Why must we so often fear and distrust others who are different?

As we approach next week’s Thanksgiving holiday, let us be aware of how we each segregate the people in our world. Let us consider that everyone we would classify as “them”, has a Mom and a Dad, and hopes and dreams, and joy and pain, and success and failure…just like we do.

May we open ourselves up to hear the stories of “their” lives. May we listen and learn enough to realize that there is no “them” in this world…there is only “us”. When we sit down to our Thanksgiving feast next week, may we break through our own walls of intolerance and celebrate with our loved ones the blessings of diversity and understanding.

Make it a great week…and a great Thanksgiving!

David Rosenthal, MAI, FRICS
President & CEO
Curtis-Rosenthal, Inc.

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