Despite Gains, This Is the ‘Weakest Recovery Ever’: Rosenberg

Recent economic gains have been primarily illusory, driven by weather-related factors that are not sustainable, economist David Rosenberg told CNBC.

David Rosenberg
David Rosenberg

In fact, the strategist at Gluskin Sheff in Toronto said in an interview, the recoveryhas been extremely weak by historical standards and would be even more so if not for all of the deficit spending and money printing in Washington.

"Is it growing? How could it not be growing," Rosenberg said. "We've got four years of trillion-dollar-plus deficits, we have a Fed balance sheet that's tripled in size, zero policy rates for three years. Of course you're going to get some growth."

But it's the type of growth that causes concern.

"If you want to take a big-picture perspective, this goes down as the weakest economic recovery ever, despite all the ramp up in government stimulus, and that really tells you something," he said.

Gross domestic product grew at a respectable 3.0 percent rate in the fourth quarter of 2011 but was just 1.7 percent for the year. GDP is on pace for about 2 percent growth in the first quarter of 2012 and many economists expect that number could slow as well through the year.

Unemployment, though, has fallen noticeably, with the government's headline rate dropping 0.8 percentage points just since August and 511,000 jobs created in January and February.

But Rosenberg said up to 40 percent of those jobs are weather-related and the product of distortions due to seasonal adjustments. Moreover, Americans had more money to spend than normal due to lower heating bills caused by temperatures that averaged five degrees above normal, he said.

"Employment data were affected by the seasonal adjustments," he said. "It felt like March in February, and if you apply the March seasonal factors to February, employment would have actually declined."

Rosenberg's sentiments are not universally shared, though, and many strategists have upped their projections for the year, particularly when it comes to stock market growth.

"As you look at the US economy over the next two years, is the US economy going to improve more or less than other economies around the world?" said Richard Bernstein, head of Richard Bernstein Advisors and a former colleague of Rosenberg's at Merrill Lynch. "We are in the early stages of a long-term period of US asset outperformance."

For his part, Rosenberg believes there are good investment opportunities, particularly in dividend-paying US stocks. Acknowledging that corporate America has rehabilitated its balance sheet, he believes there also are solid opportunities in high-yielding corporate debt.