Wednesday, February 23, 2011

Nowcasting Gasoline and the U.S. Economy

We're at a crossroads. The entire future of the "recovery" depends on what happens next with the price of crude oil and ultimately, gasoline.

With gas now at $3.45 here in the Capital Region, beyond that $3.25 per gallon "tipping point," it won't be long before we start hearing again how "people are cutting back" so they can feed the family car. Retail sales will suffer. (It's happening already, but the "wave" won't make landfall for a month or two or three.)

Last night local economy watchdog Hugh Johnson was on teevee, telling me there was not going to be "double-dip" recession.
"It's not going to turn the current recovery into a renewed recession,” Johnson said. “Sometimes popularly referred to as a 'double dip' -- that's not in the cards. But it will slow this recovery, and slow the important part of the recovery -- which is the addition of jobs to payrolls." ::LINK::
Johnson's half right. There won't be any dd IF things calm down in Arab-rich nations like Libya and the Suez Canal remains safe and free. But until the outcome of the Arab Revolution is finalized, all bets are off.

Worst-case scenario: forces in the middle east put the squeeze on oil. Investors panic. Crude prices skyrocket. $4.50 at the pumps! (By the way, it's already $4 in some parts of California). Now, factor in all those unemployed Americans who have fallen off the unemployement rolls but remain jobless. Factor in rising food prices. You've got a double-dipper on your hands, brother... as in "brother can you spare a dime dollar."

PS - Nowcasting, defined

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