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Irwin Kellner NorthFork/CBS Marketwatch Economist

March 17, 2006 @ 12:00 am EST


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This morning’s speaker, Dr Irwin Kellner, was his usual, informative self. Dr. Kellner likes to pepper his talks with some humor which went over very well, but there was no doubt about the seriousness of his message.

Irwin began by stating that we were still in an expansion mode for the economy and it’s conceivable that the expansion will last a little longer. He explained that the job creation that has been touted, recently has actually been quite anemic. Among the pitfalls, as he sees them, are the fact that our savings rate is negative. Personal debt is higher than ever. Wages are flat, and we are spending more than we are earning, which is not sustainable. According to Kellner “The days of wine and roses are over” 

The outlook for the future is weak, so investments in the stock market may not be the best move.

Home prices are showing higher values, but again this is misleading. On the high priced homes the market prices may be rising, but in the less expensive homes the prices are falling. Moreover there are 66% more houses being offered than a year ago. Having many houses for sale has a tendency to depress the price.

The national debt will absorb more and more of the available capital, and that will have the effect driving up interest rates.

The message was that general slowdown of the economy should be expected.. Long Island, while not immured to the national outlook of a slowdown, does have some bright spots that will help us. We are far more diversified than we were in the past. There are no large companies that have so many employees that a shutdown would cripple the economy.

Later in the Q&A, Irwin was asked if the unemployment rates really tell the story. Dr. Kellner told us the relatively low unemployment rates, approximately 5%, fails to acknowledge the people who are no longer counted because they gave up looking for work. It also fails to account for those who are working in jobs that pay far less than the jobs that were lost, and finally there is no differentiating a part time worker from a full time worker. If we take these factors into consideration our unemployment rate is more like 10%.. Not a pretty picture, for sure, but Long Islanders should fare better than the rest of the nation.