Analysts: Economy Headed for Fast Growth

[wicket]

http://story.news.yahoo.com/news?tmpl=story&ncid=&e=14&u=/ap/20040707/ap_on_bi_ge/economic_outlook

The economy appears headed for a banner year despite a springtime spike in energy prices and a recent increase in interest rates.

In fact, many analysts are forecasting that the overall economy, as measured by the gross domestic product, will grow by 4.6 percent or better this year, the fastest in two decades.

There were strong 4.5 percent growth rates in 1997 and 1999, when Bill Clinton (news - web sites) was president and the country was in the midst of a record 10-year expansion.

But if this year's growth ends up a bit faster than that, it will be the best since the economy roared ahead at a 7.2 percent rate in 1984, a year when another Republican president — Ronald Reagan — was running for re-election.

[northzax]

1. yup, any time now.

ignore the same thing we said last year, the year before and the year before that. WE're about to boom.

so please purchase some of our stocks, the place in the Hamptons needs a new paint job.

[wicket]

6. more tax cuts!

We need more tax cuts for the wealthy! Yeah, that's the ticket.

:D

[noahmijo]

45. How much of this "growth" will be to govt spending?

Just curious considering govt spending is 18% of the GDP which growth is primarily measured on...

[HuckleB]

2. Isn't this story published monthly about this time?

No matter what the economy is doing, they say the same thing.

"Yes, we WERE wrong. But now were RIGHT."

Well, in one way, you are, I suppose.

[Cocoa]

14. yep

for about three years, this has been repeated monthly.

Same with jobs numbers. :eyes:

[Tandalayo_Scheisskopf]

3. BWAHAHAHAHAHAHAHA!!!!

And I won't come in your mouth.;-)

[iconoclastic cat]

12. Uh...yuck. I was visualizing Alan Greenspan when I read that line.

Thanks for that visual/tactile horror show.

[yellowcanine]

4. Ok and since these economists always get their predictions right (as

opposed to telling us what happened after the fact) - we should believe this and vote accordingly. Job growth was less than expected in May and June? "Don't worry. We are right. Trust us."

[NMDemDist2]

5. there is a bursting bubble on the horizon

housing and auto sales have artifically held up the economy for the last couple years, but guess what?

anybody who could afford a new home/car has already bought one. The auto sales numbers are already showing a slide and the housing market is next

[Tempest]

7. Reality vs. Fiction

Growth in the first quarter was 3.9%, growth this quarter is slowing down.

Interest rates have gone up, and the Fed said to prepare for additional rate hikes.

Jobs, or the lack of, continues to be a major problem. Jobs for teens is at a 20 year low.


It makes me wonder, is taking Prozac now required for economists (except Paul Krugman, that is)?

[trogdor]

17. more like crystal meth.

[Tempest]

19. You're probably right

Prozac requires a prescription and leaves a paper trail.

[rpannier]

8. Economists get it right

less than the weather guessers do. We've been hearing for over a year and a half how the economy is getting better. I have yet to see it. But, I have a job in Korea so maybe all my friends aren't telling me how great the jobs are in the US.

[smokindrew]

50. Our company is exploding!

I'll fill you in on what is going on in Atlanta, GA. The small company I work for has grown 5 fold in the last year. My return on investment for my 401k was 350%. Personally, I find it hard to believe that someone with half decent skills, and a little motivation can't find a job in this economy!

[hunter]

51. Yeah, I'll bet!

Exploding...

What does your company do? Refinancing? I expect the dotcom people could tell you a little about exploding companies...

[smokindrew]

53. funny you should ask...

cause' we're a dotcommer... just a good one! I'm actually turning down jobs left and right! I guess it pays to get a degree in something other than political science.

:)

[ParanoidPat]

54. Smokindrew Recycling Industries (NASDAQ Symbol - SRI).......

Company motto, "Recycling Right Wing Talking Points since 1999". :evilgrin:

Last year smokindrew was collecting bottles and cans on his own but now his wife and four children have joined him. :)

I'll bet his 401K 'investment' amounts to a garbage can with a hastily written 'Recyclables Only' sign attached that he seeded with an empty beer bottle. The 7 other deposit bottles that other suckers threw in are pure profit!

[Beaker]

55. what are you smokin' drew?

cuz i sure want some.

when I see the help wanted ads in the Sunday Chicago Tribune go beyond one section of 20-24 pages(which it hasn't since well before 9/11/01) I'll believe that things are getting better.
During the 90's, 4 -5 sections of 20-24 pages was the norm.

[Tempest]

9. Deficit spending

Deficit spending will always stimulate the economy.

Problem is, eventually the bills come due.

China just recently surpassed the U.S. as a destination for foreign investors. That's not good news when a large part of the U.S. economy is based on foreign investments.

[UpInArms]

10. I just despise it when they

bring up 1984 as a banner year.

Yeah, right - interest rates were what - around 12-14%?

chicken feet and turkey assholes.

[Brotherjohn]

11. Read yesterday's Krugman for rebuttal. Plus, doesn't anybody realize...

... that when the economy is down, there's more room for higher growth RATE numbers? If you're at the top of a curve, you tend to level off, but if you're at the bottom, the only way to go is up. And it doesn't take as much of an "up" to look good percentage-wise. As far down as Bush has taken us, it's going to take a lot of "ups" to make up for it. Krugman points this out very clearly using jobs as an example (http://www.nytimes.com/2004/07/06/opinion/06KRUG.html?n=Top%2fOpinion%2fEditorials%20and%20Op%2dEd%2fOp%2dEd%2fColumnists). "For the first time since 1932, employment is lower in the summer of a presidential election year than it was on the previous Inauguration Day."

The impressive thing about the Clinton years was even with a booming economy, growth rate was still high (and unemployment remained at record lows). Remember people actually worrying about the economy "overheating"?

This article is a pure Republican pie-in-the-sky puff piece: "...it will be the best since the economy roared ahead at a 7.2 percent rate in 1984, a year when another Republican president — Ronald Reagan — was running for re-election."

Oh, well, that settles it. Republicans GOOD, Democrats BAD! (/SARCASM OFF)

[jobycom]

15. They do tend to leave off the fact that

between 1981 and 1984 the economy had crashed twice, and production had fallen more than any point in our past. The 1984 "boom" saw falling wages, high interest rates, and a growth that took us nowhere near where the economy had been when Reagan took over.

For those too young to remember, you are being misled. The economy under Carter grew the last two years, and employment rose. They both fell as soon as Reagan's first tax cuts took effect, crashing us further down than the Great Depression. The rest of Reagan's terms was spent with him raising taxes (six straight tax increases, including the largest in history at that time), states and local governments raising taxes, a runaway deficit (and most growth was related to government deficit spending on defense), and falling wages. By the end of Reagan, we had barely reached the levels the economy was under Carter, but since Reagan had crashed us so far down, some people still think that was growth.

[calico1]

20. How can this be?

Just last week they were saying second qtr. projections were overstated, car and home buying was down, wages were down. How does it all of a sudden turn around in one week? LOL

[jobycom]

24. Faith-based economics. nt.

[Frodo]

25. The economy grew THREE OF FOUR years under Carter.

He actually averaged about identical GDP growth in his term to what Clinton did in his first term. The problem was that inflation was 6.5%,then 7.6%, then 11.2%, then 13.6%.

But most of the rest of your post is incorrect or slightly spun. There's no comparing the economy under Carter to that under Reagan. Let's stick with Clinton where the comparisson is far more favorable?

The economy shrank in 1980.

Reagan's tax cuts weren't even PASSED when the recession started and the first person didn't get a dime back until it had ended. The cuts had no effect (positive or negative) on it. Tax cuts take YEARS before the negative impact of larger deficits is felt, and as you pointed out, tax increases later largely offset them.

But each day has it's own problems. Today we are focusing on unemployment, THEN it was inflation - even people WITH jobs were hurting badly. Reagan's mystique is spun more from inflation falling from 13.58% to 3.22% in three years than in GDP going from -.2% to 7.3% in roughly the same time. Unemployment had skyrocketed , but then (as now) it had worked it's way back down by the election. Not to Carter's levels but by a good 3%. We tried to make it an issue - you may remember how it turned out?

Something to consider for this year. I think Iraq is our better bet.

[jobycom]

28. Not quite right

Tax cuts have an immediate effect on the economy, despite the Republican "ocean liner" analogy. Flooding large business with millions of dollars immediately affects their hiring practices, their investment practices, their profit margins, etc. All of those have an immediate impact as smaller businesses are forced to compete with the sudden influx of investment money into their larger competitors. What you see is a very quick impact as smaller businesses begin to fade and larger businesses begin to grow, thus reducing the competition for labor, thus driving wages down.

I don't know what figures you are using, but Reagan's tac cuts were passed in 1981, the largest part of the recession struck in 1982. People may not have gotten their tax returns back yet, but industry accountants were certainly capitalizing on tax cuts by the time the 82 recession hit.

Carter's biggest problem was inflation, due in large part to the oil crisis and agricultural prices, was high, though it was coming down (due more to Volker's forced higher interest rates than anything else), growth was steady and positive, though weak (You may confuse declining growth with declining GDP), and job growth was steady. Under Reagan, job growth was slower than under any president since WWII, including Carter.

In short, yes, the economy got better under Reagan, and it was a painful mess under Carter, but it was improving under Carter, and Reagan interrupted those improvements, crashed us to the basement, and took credit for the natural growth out of the basement, even though his early policies slowed that growth. By 1986 Reagan had rejected supply-sided economics (though he may not have believed he did), and the economy began a real growth, though slow, until Clinton's tax and job stimulation policies (and NAFTA, despite DUers who believe otherwise) kicked the economy into high gear and allowed the tech boom which had been chomping at the bit sine 82 to finally take full rein.

[Frodo]

35. I meant negative GDP, not "declining growth)

1980 GDP figures were:

Q1 -1.7
Q2 -10.1
Q3 -.2
Q4 7.1

"the largest part of the recession struck in 1982"

The TOTAL recession was 81Q4 (-5.7%) and 82Q1 (-5.6%). You're confusing when things were reported and when they happened. The tax cuts could have nothing to do with EITHER causing OR curing those quarters. Yes, businesses change practices in ANTICIPATION of changes, but actual money flows matter. Why do you think shrub was so hot to pump cash out to people in a "rebate". Just like Bartlet on West Wing - they wanted people to spend it NOW, not when their returns come in.

No, it was the dramatic lowering of interest rates (down almost 5% from mid September 1981 to early December the same year) that jump started the economy. And several percent more over the next few years. And ti was the INCREASE in rates several months before the recession that probably fueled it.

"but it was improving under Carter, and Reagan interrupted those improvements, crashed us to the basement, and took credit for the natural growth out of the basement"

Things weren't "getting better" under Carter (or he might have won reelection). GDP growth declined from '78 to '79 to '80, inflation got MUCH worse each year and the unemployment rate (I only have annual figures) was higher in 1980 than the previous two years (so it wasn't improving). A more correct statement would be that under Reagan, some things got much worse (and he blamed THOSE on Carter) before improving (credit now goes to George Gip) and some things improved dramatically (like inflation) from day one even though he implemented no policies that could be credited for the improvement. I doubt even trickle down says that it lowers inflation. Massive deficit spending certainly shouldn't.

[TahitiNut]

39. "sudden influx of investment money"??

You're not talking about the equity markets, are you? I hope not. Far, far less than 1% of the dollar-volume of trades on the equities exchanges ever reach the businesses themselves.

[wicket]

18. Krugman

Krugman's column yesterday was especially good (though his column is always great anyway :) ). I always look forward to his column, he was a way of slicing through the numbers and crap from the Bush admin and presenting it in a clear and concise way.

[TahitiNut]

29. Ethics lower than a common mugger

These criminals spend 3 years kicking the shit out of the economy, like rabid cops beating Rodney King. Then, as the cop on the beat approaches, they pause in their kicking. The poor victim begins to come back to consciousness, struggling to his knees ... and these lying pieces of shit say "Look, officer - We're helping him recover!"

They're detestable - worse than a common street thug.

[AP]

13. Lies carefully timed to be released after Edwards nod 'cause Edwards ...

speaks to these issues.

[Sandpiper]

16. Seems like I've been hearing this for 3 1/2 years now

That this year would be the year when the economy took off like a rocket. I'm still waiting.

[llmart]

21. I don't think most people believe this crapola any more.

For 3-1/2 years now we've been hearing how the economy is surging. After awhile, people realize it's all bull.

[CWebster]

22. Or prosperity is just around the corner. nt

[birdbrain]

23. Economy IS actually headed for fast growth

Starting Jan 22nd or so...

[northzax]

26. lemme guess,

there's a Five Year Plan?

[TahitiNut]

27. Silk Purses - Sow's Ears (A Picture Worth 1,000 Words, or more)

IMHO, no sane person can view quarterly GDP growth trends for the last half-century and respond to these reichbots with anything other than complete disgust. Reagan/Bush/DimSon = Rape and Pillage!

[struggle4progress]

34. Lovely graphic. Yours? eom

[TahitiNut]

36. Yup. One of several I maintain.

I like doing my own basic analysis of BEA and BLS data, particularly GDP (and components) and employment numbers. (I dislike forming my impressions based on the analyses of those who do so one-sidedly.)

The media have been AWOL in performing such basic analyses over the past couple of decades. Once upon a time, various media outlets employed analysts to provide their own perspectives. Assumedly as a cost-cutting (and value-reducing) measure, they don't seem to do this anymore.

[JackDragna]

30. You know what would make these stories fun?

If the authors would explain just what they mean when they describe "the economy." Every indicator I've seen says the labor part of the economy is going to suck a big one when it comes to average worker salary and # of people hired for non-minimum-wage work.

[ItsThePeopleStupid]

31. and what is that "fast growth" made of?

Cashing in
Commentary: Profits should stay high with return of pricing power
By Dr. Irwin Kellner, CBS MarketWatch.com
Year-over-year, big companies have boosted profits by 20 percent or more since the third quarter of 2003. The second quarter just ended is widely expected to show a similar increase, making it four quarters in a row of 20 percent-plus gains - a rare event.

To put it another way, the share of the national pie going to profits is the highest since the government began tracking the gross domestic product back in 1947.
<snip>
What is more, earnings gains tend to come at the expense of wages. Already the smallest share of the economy in 38 years, wages are in danger of not providing enough buying power to purchase the goods and services made by business.
http://cbs.marketwatch.com/news/story.asp?guid={3BA177FC-99F0-44BE-BA8C-0FDF530B3DBF}&siteid=mktw&dist=nbc
Read it for Wall Street's perspective. He also mentions in passing that the economy is slowing down, which is why saying the economy is "headed for fast growth" is misleading at best. That fast growth is behind us.

[TahitiNut]

40. Here's a couple of graphs showing the schism ...

This clearly shows after-tax corporate profits at a post-WW2 high as a share of the "national (income) pie" and employee compensation at a post-WW2 low as a share of that same "pie."



At the same time, taxes on earnied income (i.e. labor) are at an all-time high and the taxes on unearned income (e.g. inheritance, dividends, capital gains) are at an all-time low.

Just take a look at the "wealth-begets-wealth" pillage inherent in taxes on corporate profits. Since employee compensation is an expense that reduces corporate profits (in favor of growth), we can see there's currently the least tax-incentive in history to increase employment.

[ItsThePeopleStupid]

46. Excellent graphs. Stark and scary.

Not to mention the increasing use/misuse of corporate tax shelters. Frontline had something on it awhile ago. The profits corporations report to Wall Street are way more than what they report to the IRS, and the IRS is always a few steps behind the corporate tax lawyers and understaffed.

People are just nuts to vote against their own interests this way, unless you get your income from investments and don't care about the rest of the country.

[daleo]

32. Even the stock picker guys on MSNBC were wondering this a.m.

At least one (I don't know the name, a younger guy who seems like the smart one) talked about the possibility of a slowdown having started. They were mostly focused on software sales being down, with Peoplesoft showing less than anticipated second quarter sales, among other software vendors.

[struggle4progress]

33. Update 1: Profit Warnings Slam Software Sector

<snip>
"Recent softness in the economy, increased interest rates, and continued energy price problems leave us concerned that companies are holding back on software capital spending at a time when we had expected it to increase," said Tom Berquist, an analyst with Smith Barney, in a research report....
<snip>
http://www.forbes.com/home/feeds/ap/2004/07/07/ap1446157.html


Stocks Edge Higher on Bargain Hunting
<snip>
... with another day of light volume expected, buying was on tentative footing as investors continued to worry about the slowing economy amid a rising interest rate environment. Oil prices, which continue to hover near $40 per barrel, also contributed to investor nervousness.

"This is a little bit of a relief rally, certainly some bargain hunting," said Peter Cardillo, chief strategist and senior vice president at S.W. Bach & Co. "This is a very nervous market, and it needs to hear better news from corporate America, telling it that the earnings growth is still in place. We're not hearing that from the technology sector."
<snip>

http://www.petoskeynews.com/articles/2004/07/06/ap/headlines/d83m1jvo1.txt


Dollar Falls as Economists Scale Back U.S. Growth Expectations

July 7 (Bloomberg) -- The dollar had its biggest drop against the yen in almost two weeks as economists scaled back expectations for U.S. economic growth and the pace of Federal Reserve interest- rate increases.

A smaller-than-expected employment gain last month prompted some analysts to cut their forecasts for growth to 4.5 percent in 2004 from 4.6 percent before the report, according to the median of 55 predictions in a Bloomberg survey. The U.S. currency has shed 1.7 percent against the euro since the Friday jobs figures.

``The dollar has been drifting lower, and it's an extension of the trend we have been seeing since the payrolls report,'' said Peter Frank, a currency strategist in Chicago at ABN Amro Holding NV. ``It definitely put a seed of doubt in one's mind about the pace of the U.S. recovery.''
<snip>

http://quote.bloomberg.com/apps/news?pid=10000103&sid=ah2bMWkzKibM&refer=news_index


This is just too easy ...

[wicket]

37. Wow, the economy is just BOOMING, eh?

:evilgrin:

[Media_Lies_Daily]

38. Alrighty-now! Pay no attention to what you're actually seeing! Move...

...along folks! The only thing you need to believe is what we keep telling you about that growing economy!

Quick question for anyone that has swallowed this hook:

If the NeoCons have lied about everything else, why wouldn't they also lie about the economy?

[JCMach1]

41. Bullshite....!

I will post in GD shortly about this...

[ProfessorGAC]

42. Lots Of Errors In That Report

And, i mean LOTS!

First, the average of the "Clinton" years is not 4.5%. Those numbers included 1992 (he was elected but wasn't yet president) when the nominal growth rate was under 3.4%. Same for 1993, before any of his fiscal policy moves took effect. They included 2000, which means they used 9 years, when he was only president 8 years.

Take those 2 years away and the average was nominal growth was over 4.9%. Moreover, the inflation rate was so low (less than 1.2% on average) that the growth rate exceeded 3.75% in REAL terms.

Then, since gov't spending as a %RealGDP went down, and revenues went up, M1 fell. This means that the growth rate was superior to the average Natural Growth Rate over the prior 50 years.

The current economy is leveraging this supposed growth on three major problems. First, the gov't is spending more money, and it's borrowed money. Secondly, the inflation rate is higher. Thirdly, the weak dollar has artificially lowered the value of net imports.

So, the growth rate sustained by internal consumption is going DOWN! That's a bad thing for long term sustainability of economic growth. There are many papers (including some by me) published that prove this to be true. Borrowed money & gov't spending cannot sustain long term growth, and it negatively impacts investment, so it hurts down the road, too!

This report is technically flawed, and to be honest, is flat out wrong. I see no such rosiness on the horizon. Unless gov't spending gets into control, transfer payments rise, and the dollar strengthens to reduce inflation, and to stabilize consumption, the periods of growth will continue to be momentary blips.
The Professor
The Professor

[funnymanpants]

43. Thanks

So then who are the analysts quoted in the article? I found if frustrating that not only did the article not give names (or groups of names), but didn't even give statistics, saying something like "most analysts" or "80 percent of analysts."

How many econocomists in your opinion agree with this article, and how many would disagree?

[ProfessorGAC]

47. 70:30

I'm in the minority of the econ community in that i don't have any preset theories. I analyze massive bodies of data, draw conclusions, and then hypothesize the causes and effects of what actually happen in the macroeconomy.

70% of the econ community either adhere to certain economic dogma and look for reasons to support that pre-existing theoretical belief, or simply aren't smart enough to know the difference. It's a major disappointment to me.

The other 30% are the analytical group who operate more like i do. You can clearly tell the difference of the philosophical perspective by reading their published works.

The Professor

[TahitiNut]

49. I have very serious qualms when it comes to using the CPI ...

... (either 1967 or 1983, and no matter which demographic base) when it comes to doing "inflation adjustment" for the GDP. The derivation of the CPI, as I understand it, is a "market basket" of durable goods, non-durable goods, and services that're consumer-oriented. I'm not comfortable with employing that index to normalize GDP over time. What's the alternative?

[notadmblnd]

44. Where?

MCI let 7500 go last month this yesterday my company let 3500 go, me amongst them.

[Rebellious Republican]

48. Avg Rating: 3.39, 156 votes - Your Rating: 1 Don't forget to Rate

[mhr]

52. My Two Cents - The Following Graph From The Dallas Fed

Plots total employment for the major Texas cities.

Dallas and Austin were the high-tech centers in the state - translation, good high-paying jobs. Anecdotally, I understand that Austin has close to 12,000 houses on the job market. Dallas is not much better - foreclosures up for the third straight year.