Today at 11:30 AM ET, President Barack Obama is going to give a "major" speech on the economy. Results of the latest polls indicate that the country believes he has a clear plan for solving the country's economic problems. Yesterday, the President said that US efforts to stimulate the economy with infrastructure projects are "ahead of schedule and under budget." Clearly, the President is going to give an upbeat assessment of all the government efforts to stabilize the financial markets and the economy.
Not waiting for the speech, President Obama's economic adviser Christina Romer already is hitting the morning talk shows and lowering expectations for any "major" improvements in the economy any time soon. On NBC's "The Today Show" she said, "We know the economy's still sick. We know we've got several more months of job loss, for example. We know that the numbers on GDP are almost surely going to be very bad for this quarter and next."
Appearing on MSNBC's Morning Joe, she said Obama will deliver an economic speech today that "really tries to bring it all together"according to Politico . "Romer said Obama will address "what's been going wrong"in the economy and also what the administration is doing to help. The economic adviser said the administration is expecting to see some growth in 2011 or 2012. "It certainly will take some time,"she said, adding that Obama knows the American people are still in for a rough time. "That is something that he's aware of,"Romer said. I'm glad he didn't forget.
The fact is that things have improved from the standpoint of a near global financial collapse last year. There are certainly signs of improvement and stabilization in the financial markets. As an indicator of stock market fear, the VIX index drop from a high of 89.50 in October to a low on April 9th of 36.53. As an indicator of credit fears, we've seen the 3mth Libor-OIS spread drop from a high of 345 points in October to 92 today. We've seen the United States country 5 year CDS drop from a high of 100 in February to a low of 47.8 on April 6th. These are all important financial signs of stabilization.
From a standpoint of normalization, we have a long way to go. Remember, the 3mth Libor-OIS spread was just 5 basis points before the summer of 2007. The economy is still in decline and the unemployment rate is expected to breach 10% this year. Hence why Romer is so cautious in her outlook.
Today, Obama will walk an extremely fine line of managing expectations for the future. He'll want to take credit for getting the stimulus plan together quickly and for getting the money to flow. He'll want to reassure Americans that things are improving. He'll want to promote his budget as the next key item in the process. He wont' want to raise their expectations that things will improve quickly or he'll risk disappointing not only the voters but also the markets.
The Obama administration has had major problems with messaging and the financial markets. Let's see how he does today.