Predictions 2012

Albert Bozzo: Economics


1. The economy surprises on the upside.

Housing, autos, employment and trade will boost growth, with GDPexpanding between 2.50 to 3.00 percent (the latter more likely). Consumer confidence will continue to rise, as well.

2. Residential housing starts its recovery.

Gulp. Fatigue has set in. People are tired of the negativity. Interest rates won't go any lower, prices are very attractive and the rental life is overrated and overpriced. Foreclosures will not be as negative a force as people expect. Some markets are already in solid recovery mode. Generally, sales will rise, with prices flattening, then inching higher.

3. President Obama wins re-election.

As the 2004 presidential race showed, a weak incumbent can beat a weak, waffling challenger from Massachusetts with good hair. Mitt Romney is the GOP's version of John Kerry. Obama is a great campaigner who will best a robo-candidate. This race will be closer, but the South and West turn the tide.

4. Unemployment shows dramatic improvement.

Yes, a relative statement. The jobless rate will drop to 7.5 percent (maybe even less), thanks to a couple strong months, and enough to be a factor in No. 3.

5. The Euro survives and emerges stronger.

It's all about a federal Europe and the commonweal. Members can fall out. The debt crisis has opened the door to fiscal cooperation, and meddling in other states' affair is now the acceptable norm. The common currency has to remain relatively strong, because the dollar is done, and the world — at least for now — needs an alternative to the yuan or rupee.

Results for 2011

I'm a tough grader, so I give myself a B for getting four out of five correct .

1. The economy slogs along with subpar growth.

Grade: B+

The factors I cited pretty much played out. GDP through three quarters is 1.70 percent (weaker than my forecast of 2.25 percent but estimates for the fourth quarter range from 2.50-3.00 percent). Bad global weather — seriously — made a difference.

2. Unemployment will range between 8.5 percent and 9.0 percent, most likely averaging near the higher end.

Grade: A

I was a bit optimistic about the low end (8.8 percent was the lowest), but the average is spot on — 9 percent.

3. Deflation, not inflation, will guide policy.

Grade: A-

Th Fed didn't cite deflation concerns outright, but everything abut its policymaking suggested them.

4. Democratic shakeup.

Grade: C-

Almost describes my boldest prediction. Speculation swirled that Treasury Secretary Tim Geithner was leaving. He hasn't (yet). However, White House chief economist Austan Gooslbee did leave and chief of staff William Daley has been sidelined. Alas, neither Nancy Pelosi nor Harry Reid have yielded their leadership roles, but Barney Frank is retiring.

5. Deficit reduction goes nowhere, yielding nothing significant.

Grade: A

Nothing. Nada. Niente. All talk, no action.