Business | Opinion
Best of Lex: Economic resolutions for the New Year
For 2010 some have given into the temptingly sweet scenario of moderate growth
- Financial Times
- Published: 00:00 January 6, 2010
First: I shall spend more time with my friends and family. That should be a cinch. Even though unemployment in the countries that comprise the Organisation of Economic Co-operation and Development (OECD) may have peaked, it is unlikely to fall substantially in 2010.
Unemployment in America has more than doubled over the past two years. US unemployment is at about 10 per cent in December, but this week could bring vital evidence of healing in the labour market.
Non-farm payrolls have declined every month since January 2008, but December data, due on Friday, could show the first rise in employment since the end of the recession. In the UK, it is also likely that unemployment will start to drop this year, although not in time to affect a springtime election.
Second: I shall try to get out of debt, much like everyone else. For the average Joe, rebuilding the household balance sheet is an inescapable imperative. In countries such as the UK with high levels of personal borrowing, the process will be painful.
As RAB Capital economists note, the decade or so of above trend economic growth up to 2008 that Gordon Brown regularly boasted about was essentially due to the fall in the savings rate from 5 per cent in the mid 1990s to an unsustainable -9 per cent in 2007.
The debt boom gave UK consumption a massive boost. If the savings rate is zooming back to 5 per cent, UK economic recovery will be slow.
Third: I shall learn something new, because globalisation has barely got into its stride. In countries whose economies are being hollowed out by outsourcing, a college degree from an elite university is no longer a ticket to job security. Employees who build up firm-specific human capital at the expense of more transferable skills are in danger.
The west has entered what writer Tina Brown has dubbed the "gig economy". Learning Mandarin may be useful. Better to learn how to stitch together freelance projects, consultancies and one-off contracts to make ends meet.
Singapore
Goldilocks gets a lot of press at this time of year, as analysts chew over economic outlooks. For 2010 — with many unsure what to call it, let alone how to call it — some have given into the temptingly sweet scenario of moderate growth ("not too hot, not too cold").
If Monday's fourth-quarter gross domestic product numbers from Singapore are any guide, the next phase of its recovery will be unappealing porridge: lukewarm and lumpy.
The city-state has a dependency on exports about twice the Asian average, as a percentage of gross domestic product. Last year, the first two stages of its rebound — the post-crisis bounce, followed by the positive effects of the huge easing of fiscal and monetary policy — were characteristically intense.
After an annualised quarter-on-quarter contraction of 13 per cent in the first three months last year, gross domestic product (GDP) shot up by 22 per cent in the second quarter and 15 per cent in the third.
In that context, a smooth extension of that trajectory out of the longest recession since independence in 1965 was always unlikely. Even so, Singapore's lurch to a 7 per cent contraction in the final three months is worrying.
The optimistic view is that this reflects a simple inventory correction in volatile export sectors such as pharmaceuticals and transport engineering. That may be so: Singaporean manufacturing shrank by 38 per cent in the fourth quarter, having expanded by 30 in the third.
But as Prime Minister Lee Hsien Loong underlined last week in an unusually subdued New Year message, counting on export markets roaring back is unwise, as developed countries withdraw stimulus measures and try to whittle back fiscal deficits.
The sunlit uplands of stage three — a self-sustaining recovery — still look like something out of a fairy tale.
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