Reasonable AND informed perspectives on the US economic Rorschach

[BaliBabyDoc]

Yahoo
(very limited excerpts b/c I'm trying to promote traffic to Yahoo so they get more advertising/commerce revenue . . . hopefully enough to justify current share price)

While many economists are optimistic the third-quarter jump was a turning point, some wonder if it was a temporary surge brought on by tax cuts, mortgage refinancings and a resumption of economic activity after the first part of the war in Iraq (news - web sites) came to a close.

"The question is: Is the economy just living off of a sugar high from tax cuts and mortgage refinancings in recent months?" asks Stuart Schweitzer, global markets strategist for J.P. Morgan Fleming Asset Management. Although Schweitzer believes the economy will continue to improve, he notes, "It's too soon to know for sure."

A recent survey of members of the National Federation of Independent Business showed that despite a dip in small business hiring plans in September, the hiring outlook was brighter than earlier in the year. A second report from the National Association for Business Economics out Wednesday, however, showed firms barely increased their hiring plans in October despite reporting large gains in overall demand.

Some economists are also skeptical the big gains in consumer spending will continue. Both Merrill Lynch and Goldman Sachs are anticipating a fairly dramatic slowdown in spending, arguing recent gains have been a one-time boost in response to the tax cuts package passed in late May.

"Once the economy gets rolling along, you have a self-reinforcing mechanism develop in which consumers get more optimistic as they see ... unemployment going down, and they begin to spend more," Schwab's Gramley says.

Despite the sharp gain in the third quarter, there are few signs that businesses are gearing up to spend. Commercial lending at banks is at the lowest in five years, according to Federal Reserve data. Although some of the lending decline can be explained by technical factors, the trend is discouraging.

 

[CADsortaGUY]

"I don't think we're going to have a boom, but I think we are going to have a very good economy," says Lyle Gramley, a former Federal Reserve governor now at Schwab Washington Research Group.

I don't think anyone here is saying that the economy is "good" or "great" but it is most definitely on it's way to getting there. I hear alot of this "it's unsustainable..." talk - well, no sh!t sherlock - 7.2% hasn't been matched in ~20 years. What it does show though is that there is still demand, and consumer confidence is there - as many indexes, reports, and other signs are showing. I think we'll have a decent 4th quarter but obviously hitting 6+% is quite a lofty outlook. Anything over 4 would be "good" and anything close to 5 would be great and would build on this flow towards a sustainable revived economy.

meh - be pessimists if you wish, new years resolutions are just around the corner anyway - maybe you can use this as one that you'll actually keep (changing from pessimist to optimist)

CkG

 

[BaliBabyDoc]

I agree with most of your assessment with the exception of the implication that GDP is the most important element of our economy. It's still reasonable to expect future employment growth based on current GDP figures but I can guarantee that Bush would trade at least 4% of GDP (revise down to 3.2%) for a tenth of that in improved employment (revise down to 5.7% from 6.1%). I bet he would trade virtually all of the GDP growth for something resembling employment growth.

Dramatic cuts in funding to schools (particularly higher education) and most forms of infrastructure unrelated to Homeland defense will extract a toll in the long run. Government has provided no guidance for abating the rising tide of healthcare inflation and even less for the tsunami of Baby Boomer retirement/Medicare.

I'm ahead of the curve b/c I spent all of my tax cut (damn this 3/4 stuff) but unlike the majority of Americans we have extremely secure employment (healthcare/education), very low debt, and several % points if we wanted to refinance (have not done it b/c we are relocating in less than 2 yrs). Bush is dependent on families like mine to buy him a 2nd term. I don't see it happening . . . granted I call that optimism not pessimism.

The US economy is not amenable to micromanagement. Accordingly, Bush activities are just tinkering . . . which means he deserves neither blame NOR credit for most outcomes . . . with the notable exception of the atrocious budgets he's signed.

 

[CADsortaGUY]

Originally posted by: BaliBabyDoc
I agree with most of your assessment with the exception of the implication that GDP is the most important element of our economy. It's still reasonable to expect future employment growth based on current GDP figures but I can guarantee that Bush would trade at least 4% of GDP (revise down to 3.2%) for a tenth of that in improved employment (revise down to 5.7% from 6.1%). I bet he would trade virtually all of the GDP growth for something resembling employment growth.

Dramatic cuts in funding to schools (particularly higher education) and most forms of infrastructure unrelated to Homeland defense will extract a toll in the long run. Government has provided no guidance for abating the rising tide of healthcare inflation and even less for the tsunami of Baby Boomer retirement/Medicare.

I'm ahead of the curve b/c I spent all of my tax cut (damn this 3/4 stuff) but unlike the majority of Americans we have extremely secure employment (healthcare/education), very low debt, and several % points if we wanted to refinance (have not done it b/c we are relocating in less than 2 yrs). Bush is dependent on families like mine to buy him a 2nd term. I don't see it happening . . . granted I call that optimism not pessimism.

The US economy is not amenable to micromanagement. Accordingly, Bush activities are just tinkering . . . which means he deserves neither blame NOR credit for most outcomes . . . with the notable exception of the atrocious budgets he's signed.

I did not imply, nor ever have said that GDP is the most important figure. There are MANY other indexes and reports that determine direction. All these combined point towards "getting better". About the only BIG thing that is missing is huge gains in employment.

Oh, and what's this about "tinkering"? I thought this "Bush economy" was the worst in ages....are you saying that the "candidates" are lying to us when heaping the blame on Bush?

Oh, and one more thing - school cuts? I seem to remember Bush trying to work with Democrats on that...I just can't remember who Bush had write that Education bill though....I'm sure I'll remember after I dry off from taking a swim

CkG

 

[BaliBabyDoc]

I did not imply, nor ever have said that GDP is the most important figure. There are MANY other indexes and reports that determine direction. All these combined point towards "getting better". About the only BIG thing that is missing is huge gains in employment.

I stand corrected for misunderestimatiunderstanding your post Although a more accurate characterization would be that MANY other indexes and reports determine direction. SOME point towards "getting better" while SOME point towards no change while SOME point towards getting worse. The link I provided plus our general discourse points towards the unanswered question . . . Is the COMBINED presentation truly indicative of an improving prognosis. Your last sentence though is quite inaccurate. I would say not only are huge gains in employment missing there's not even significant gains in employment. As measured by the unemployment rate it would be reasonable to say there's been NO gains in employment. Furthermore, many of the jobs in low and high tech may not return.

Oh, and what's this about "tinkering"? I thought this "Bush economy" was the worst in ages....are you saying that the "candidates" are lying to us when heaping the blame on Bush?

Oh the Bush economy isn't very good (ie economy during his administration). But it's inappropriate to heap blame upon him . . . except for failing to invest in infrastructure and signing budgets that GUARANTEE indebtedness for future generations.

Oh, and one more thing - school cuts? I seem to remember Bush trying to work with Democrats on that...I just can't remember who Bush had write that Education bill though....I'm sure I'll remember after I dry off from taking a swim

No Child Left Behind is a big partially-funded mandate. And it was clearly written by Republicrat idiots b/c it has little basis in best evidence for education reform. And Teddy Kennedy was the fiercest critic of this law merely months after it was signed b/c allegedly Bush pulled a Clinton . . . ie; he said one thing and has been doing another.