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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The economic consequences of a U.S. government shutdown can’t be calibrated on a spreadsheet with an economic model. It all depends on who wins public opinion–Congressional Republicans or the president and Democrats.

Federal spending is out of control. From 2007, the last full year before the financial crisis, to 2011, the second full year of economic recovery, spending has jumped $1.1 trillion, 40%, when a $200 billion increase would have satisfied inflation.

For any other country, a deficit exceeding 10% of gross domestic product would force austerity by sending interest rates on government bonds through the roof. Alas, the U.S. prints the world’s currency–the dollar–so it can inflate its way to solvency, and the bond market is starting to take that bet.

Enter the Tea party, that troublesome bunch of youngsters pushing elder Republicans to stand up for fiscal solvency, end the madness or halt funding for the government.

Closing federal offices for a few days will have not a great, lasting impact. On reopening the checks will go out. What counts, though, is whether the newly elected conservative majority in the House of Representatives keeps its mandate as measured by the polls.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Labor Department reported Friday that the economy added 216,000 jobs in March. After adding 194,000 jobs in February, this indicates the economy is finally gaining momentum. First-quarter growth will likely be a bit higher than 3%.

Unemployment ticked a notch lower to 8.8% on the strength of jobs growth. Unlike past months, this improvement could not be attributed to adults leaving the labor force.

These gains are in sharp contrast to weaker gains the previous 13 months, and largely resulted from stronger, potentially self-sustaining private-sector jobs growth.

As measured by gross domestic product, the economic recovery began in July 2009; however, the economy did not begin adding jobs until January 2010, and gained only 76,000 jobs a month through January 2011. Too many of those job gains were created by stimulus spending, temporary business services, and health care and social services, which are heavily subsidized by federal and state governments. Job gains in the core private sector–private employment less temporary business services, and health care social services and temporary business services–averaged only 47,000 a month.

Core private-sector jobs are so important, because those have the potential to set off a virtuous cycle of hiring, consumer spending and more hiring. In March and February, this barometer of private sector vitality gained 183,000 and 157,000 new positions, respectively. Similarly strong core private-sector gains will be needed to continue adding 200,000 or more new jobs each month going forward.

The jobs drought may finally be over but important challenges remain.

Gains in the range of 200,000 a month are not enough to push unemployment down to acceptable levels. Continued dependence on foreign oil, the growing trade deficit with China, and health care and tax policies that penalize the location of businesses in the United States are responsible for slower jobs creation than has been accomplished during past recoveries and that could still be achieved.

The economy must add 13 million private-sector jobs over the next three years–360,000 each month–to bring unemployment down to 6%. Core private-sector jobs must increase at least 300,000 a month to accomplish that goal.

The economy is expanding at a 3% annual rate and this is barely enough to hold unemployment steady, because the working age population increases 1% a year, and productivity advances about 2%. Growth in the range of 4% to 5% is needed and possible to get unemployment down to 6% over the next several years.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The tea party is winning big, because the U.S. economy is failing. Voters are disgusted with a mess instigated by Washington spoiling Wall Street and kowtowing to China, and leaders of both major parties appear clueless.

President Barack Obama’s obsession with higher taxes for families with incomes over $250,000 a year and the strident Republican defense of the Bush-era tax cuts lay bare the sterile competition between the economic philosophies of the two major parties.

Neither, reckless Keynesian spending and deficits nor supply-side tax cuts and indiscriminant deregulation will rescue the U.S. economy from its quagmire.

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These are the personal views of Lena Komileva, group chief economist overseeing market economic research at Tullett Prebon:

In the end it was the disappointing Federal Reserve Bank of Philadelphia survey and U.S. Dept. of Labor’s jobless claims figures that provided the trigger for a fresh downgrade in investor risk sentiment and appetite for yield in an otherwise peaceful holiday week.

The Philadelphia Fed survey is the most volatile of regional surveys and carries the weakest correlation with the nationwide trend, so the fundamental implications should not be overstated.

Still, the July decline sends an important signal for the health of the economy as it reflects a universal picture of deteriorating corporate sentiment that is driven not by ultra-low Fed funds rates and the strong earnings-driven liquidity reserve accumulated through the past two years’ deleveraging, but by companies’ desire to protect capital and cash-flows in an environment of restrictive credit, local government austerity and future economic uncertainty.

In the survey detail, the Philadelphia Fed purchasing managers’ index manufacturing fell into contraction territory, at -7.7 in August, down from +5.1 in July, for the first time since July 2009 (-8.9). Core growth components sent out universally bearish signals as new business flows, shipments and backlogs all fell and firms slashed inventories and employment.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, forecasters expect the Labor Department to report the economy shed 70,000 jobs in July and that unemployment rose to 9.6%.

Economists expect the private sector created about 100,000 jobs but government employment fell 170,000, as more temporary census jobs disappeared.

Thirteen months into recovery from a deep recession, this is disappointing. The economy must add 13 million private sector jobs by the end of 2013 to bring unemployment down to 6%. President Barack Obama’s policies are not creating conditions for businesses to hire those 320,000 workers each month, net of layoffs.

Net of inventory adjustments, the economy’s demand for goods and services is growing at only 1.3% a year.

In the second quarter, consumer spending; investment in new structures, equipment and software; and government purchases added 4.1% to demand–but as imports grew much more rapidly than exports, the trade deficit tapped off 2.8%. The difference, 1.3%, is annual growth in demand for U.S.-made goods and services. That has been the pace since recovery began in July 2009.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Bush tax cuts were a huge success, and failing to extend them for all Americans–not just families earning less than $250,000, as President Barack Obama proposes–would be a terrible mistake.

Contrary to current White House propaganda, President George W. Bush achieved a lot of growth prior to the financial crisis, and lower taxes for all helped. The Bush prosperity was the byproduct of several multidecade policy trends that freed markets and empowered individuals to innovate and create wealth.

Freer trade championed by presidents since John F. Kennedy, and deregulation (begun by Jimmy Carter with the airlines) were critical to this trend. Also key was reducing excessively high tax rates on upper-income Americans, initiated by Ronald Reagan, somewhat interrupted by Bill Clinton, and reinstated by Bush.

Economists recognize highly productive people, if taxed punitively, create less wealth in the U.S. through arcane tax planning or simply move investments offshore. Higher taxes for high-income families would raise rates on fully half of the income earned by proprietorships and leave those small and medium-sized business with less to invest in creating new jobs.

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These are the personal views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

The release of the advance second-quarter real GDP growth of 2.4% was in-line with our expectations. But the composition of much weaker consumer spending and greater inventory build per se implies softer growth prospects in the third-quarter. Consequently, we bumped down our third-quarter growth forecast to 2.2%, but maintained our 2010 growth outlook of 2.9%.

The GDP release last Friday also incorporates the usual benchmark revisions to the data. Real GDP growth in the prior three years was revised down by 0.8%-point in total, mainly as a result of weaker consumer spending (-0.6%-point). Although the contribution from inventory change was revised up marginally (0.1%-point), the other categories of demand generally added less to or subtracted more from GDP growth.

In line with a flatter recovery path, our 2011 growth projection–primarily resulting from a softer first-half 2011 backdrop–has been tweaked lower to 2.7% from 2.8% previously.

Even though the recent U.S. economic data releases have undershot consensus expectations on balance, financial-market indicators have actually improved some since the end of June.

Indeed, U.S. investment-grade and high-yield risk spreads have tightened since late June and early July. Similarly, U.S. equity index implied volatility has also eased compared to a month ago.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The White House is pumping sunshine–the economy is in tough shape

Second-quarter GDP numbers show the economy is not growing fast enough to create jobs and bring down unemployment.

Of the 2.4% growth reported, 1.1% was an increase in inventories–essentially businesses rebuilding and adjusting inventories from recession lows and to accommodate more price-conscious consumers.

This indicates actual demand in the economy is growing a scant 1.3% a year. Businesses can accommodate up to 2 percentage points through higher productivity and without adding workers.

Unless spending picks up (and indicators are that is not happening), once businesses stop piling up unsold goods, layoffs will outnumber hires, unemployment will rise with a vengeance, and the economy will head into a second dip. That will not likely happen until after the election. It will show up in fourth-quarter data.

Consumers and business have been spending, but too much is going into imports–the trade deficit subtracted 2.8% from growth. Put another way, had exports and imports grown by the same amount, economic growth would have been in the range of 5.2%.

Almost the entire trade deficit is oil and China but the president is not doing enough about either.

We get out by dealing with China on the trade deficit–either it revalues the yuan or we revalue it by taxing or licensing dollar yuan conversions. Create a Savings and Loan Crisis era Resolution Trust.

Start building many more gasoline efficient vehicles–the emphasis on electrics is nice but their large impact is many years away

Develop more domestic oil and gas.

Even with those problems addressed, small and medium-sized businesses are not doing well because they can’t get credit from regional banks. An audit of U.S. banks by the International Monetary Fund says the four largest banks have adequate capital but the regional and small banks need another $19 billion, all those toxic assets that did not get cleaned up.

Don’t expect to hear the president talking about this out on the hustings this weekend.

The author can be reached at pmorici@rhsmith.umd.edu

These are the personal views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

The whispers of U.S. “double-dip” recession prospects have gotten louder recently. While financial indicators have deteriorated on net, data on the real economy have not pulled back as much.

Using a proprietary leading index combined with a probit-regression framework, our estimation suggests that the odds of a recession over the next six months are probably around 5% at this juncture. The recession-alert threshold is about 40% (i.e., if the probability rises beyond 40%, the risk of a recession becomes significant).

The estimated prospects of a recession over the next four quarters appear to be in the vicinity of 10% to 15%. While the chances seem to be higher as the duration lengthens, they are still not statistically significant at this point.

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NEW YORK — As indicated by the May consumer price index, inflation remains the no-show of this recovery.

The top-line CPI has fallen for two months in a row, dragged down by falling energy prices. Even excluding food and energy, the core CPI has risen just 0.9% over the past year.

Underneath the quiet surface, however, are signs of “stealth inflation.” Companies and industries are trying to slip in price increases without appearing to be hiking prices.

It’s a way to pump up revenues at a time when demand growth remains modest. The incidents should become more numerous when the recovery becomes more durable and businesses test the waters when it comes to raising prices.

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