Face It: 2013 Is Gonna Be a Bummer

As this Businessweek article points out, the fiscal cliff in not the only impediment facing the US economy and consumer.  Just as important as the looming tax increases and mandatory spending cuts will shave point off of GDP and erode both business and consumer confidence, shifts in demographics is a headwind to the US economic recovery.

Although this article is from September, we have stated very strongly that whoever won the Presidential election was going to have a tough road ahead of him.  David Rosenberg, chief economist at Gluskin Sheff + Associates also have been making this same point as well.

• In the early 1980s, the average baby boomer was 25; today, she’s 55. In 30 years, the U.S. has gone from having its youngest workforce on record, with an average age of 35, to its oldest, with an average age of 42. Younger workers cost less, are more flexible, and create households, prompting consumer spending. “It’s not that the recovery is dysfunctional, it’s that the demographics have turned against us,” says James Paulsen, chief investment strategist at Wells Capital Management.
• Today’s monetary situation is more difficult as well. In 1982, after then-Federal Reserve Chairman Paul Volcker tamed inflation and cooled demand with high interest rates, he had plenty of room to lower rates as the economy took off. Current Chairman Ben Bernanke has much less space to maneuver after taking interest rates as low as he could to boost demand and guard against deflation. “It turns out that killing inflation is a much simpler task than quashing deflationary pressures,” says Rosenberg.