Stephen Roach, chief economist for Morgan Stanley, beat his familiar drum about the need for global rebalancing when he spoke to a packed crowd at the Grand Hyatt.
He argued once again that the US could be headed for trouble with its housing bubble and a massive sector of society - particularly in the manufacturing sector - underemployed at jobs that offered half the wages they once earned. ItÆs hard for an American listening to Roach to feel sanguine about the nationÆs future.
If one didnÆt know better û as in what the pollution, road-deaths and overall low-wage conditions are like for the vast mass of Chinese - one would want to move to China tomorrow, after listening to RoachÆs speech. China, he conceded, needs to slow its growth, reduce its exports and increase its own consumption-driven economy, but these are points he said the Chinese government understood and would implement.
An hour later, Bruce Kasman, global head of economic research for JPMorgan, spoke to a dining room full of bankers at the Island Shangri-La. His take on the US economy: there are some hiccups for sure, the Fed could mishandle its rate hikes, but overall the economy is ticking along.
He focused on corporate America rather than manufacturing America, and saw the housing market as cooling, led by those who were borrowing at sub-prime rates, but overall he did not see it as an insurmountable problem, particularly as many households have equity in stocks and mutual funds. With US business positioned to grow further, the overall picture isnÆt gloomy.
Both economists are no doubt right û they just focused on different data. Should you look at the unemployed machinist in Peoria, Illinois who is now re-employed as a check-out clerk at Walmart? Or should you look at the chief executive sitting in Manhattan in his glassed-windowed corner office who just got a raise for relocating his Fortune 500 companyÆs manufacturing to China?
To be fair, both were ostensibly focusing outside of the US û with Roach talking about China rebalancing and Kasman talking about a less-US centric world as global reflation promotes a rotation away from the American economy. But to make their points they trotted out the US data that showed which parts of the US economy they were more fixated upon.
Roach looks to China with a certain amount of awe; Kasman focuses more on the fundamentally strong story coming out of Japan these days.
But while they may zoom in on different numbers, they do stick their neck outs to be judged û by making forecasts. HereÆs some headline thoughts to watch.
ôI think the global growth rate will slow steadily through the course of the year to 3%,ö predicts Roach.
His three key reasons: oil, the end of the US housing bubble, and the slowing down of Asia. He forecasts slower growth in Japan and China, with Japan adversely impacted by a strengthening yen and China purposefully trying to slow its economy. But he does say that the outlook for global rebalancing (the typical title of his speeches) is now improving.
Kasman says that Japan is now a 3% economy and the Euro area is set to grow by 2.5%. US core inflation will consolidate above 2% this year and the Fed will move rates up to 5% and wait. He jokes that the Fed should perhaps spend some time reading his reports more carefully. But he does say corporate health and easy global money will support growth.
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