But it also suggests a degree of caution amongst employers, which does run the risk that it's self-fulfilling. Why the caution? The dreary European debacle has to be affecting sentiment. But more likely is the prospect of the fiscal cliff in January. The automatic tax increases and spending cuts which are forecast (depending on the forecaster) to reduce GDP by 3 to 5% must be affecting confidence. This isn't irrational -- Japan tightened fiscal policy early in its now 20 year stagnation and caused the economy to plunge back into recession, and in 1937 in the midst of recovery from the Great Depression, a newly elected Republican Congress forced a balanced budget on the US causing a deep recession.
Time for the politicians to stop acting like three-year olds.
[As ever, click on charts to enlarge]
|Change over 6 months, inverted|