The US Economy

Amen, and amen.

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So, who ya gonna believe? Personally, I'm bettin' against the folks whose prognostications of doom and gloom have been off-the-mark so far. I think their track record the past few years speaks for itself, and rather loudly at that.

the Dys prediction, since I know nothing I am not charging for this prediction; in 6 months the DOW will hover in the 8500 range:

Anything's possible, dyslexia, but I'm betting the other way, and using my own real money; after almost four years of playing the market short, I'm going long on futures options contracts. I'm figuring by the end of Q4 '03 the Dow will be well above $10K ... an even more optimistic outlook than I held HERE

I guess my vote in that poll stands out, there's only one for the $10K category.

dys, Seems we belong to the same club: namely that we don't think the US economy is in growth mode. Here's what the feds were saying last year about growth during 2003. Namely, that we'll see growth in the second half of this year. What I see is the continued loss of jobs. If I'm not mistaken, 93,000 people lost their jobs last month. It's a funny way to grow the economy. One thing I don't understand is why timber insists on calling us "doom and gloom" folks. Said nothing of the kind. Just said the economy ain't gonna grow like the experts are predicting. Here's the link. http://twincities.bizjournals.com/twincities/stories/2002/12/09/daily26.html Since the second half of this year is almost over, the chance for economic growth this year is getting closer to nil.

Well, you earlier admitted to a contrarian viewpoint, and you're certainly entitled to that. Neither I nor the majority of analysts share your pessimism:

Analysts see continued US GDP growth

Pretty similar to the article I posted earlier, but they both make the point. Growth has occurred, is occuring, will continue to occur, and no contraction was ever experienced. Your article, from December of 2002, indicates expectation of moderate growth in "The Second Half of 2003". The already posted growth figures for Q1 and Q2 '03 exceed the '02 estimates; continued growth, as appears assured, is merely gravy, by those earlier calls. Not only were the earlier predictions met, they were surpassed, and ahead of schedule. In GDP terms, the US economy has been decidedly in growth mode all year.

And while "Jobs" remains a matter of disappointment, the news there is, though not rosy, at least showing signs of sprouting, even if not yet blooming:

Just one point: Job growth will indicate economic growth as far as I'm concerned. That 9 million are out of jobs, and more job loss every month, tell me that "economic growth" has a long ways to go. Those economic growth statistics provided by the government are nice, but a turn-around in job losses month after month would also be nice.

i recommend we all have a look at some comments made by henry kaufman about three years ago; i think his comments have value even today, because they point out the difficulties of making predictions. personally, i have started re-reading alvin toffler's THIRD WAVE - written some THIRTY years ago; i have to admit that i understand it somewhat better in OLD AGE than i did thirty years ago! hbg ... (i won't pretend to be in kaufman's league - even though his dad was a german butcher) ... www.nyssa.org/abstract/kaufman.html

Well, here it is October, and employers report that payrolls increased by 57,000 jobs last month. Hopefully those of you arguing that you won't believe in the recovery until the jobs picture changes will find some reason for hope.



(BTW, I love CNN's understated reporting, adding 57,000 jobs when you expected to lose 30,000 is merely "topping expectations". )

As to the unemployment rate, consider this:

I did not know this, and given how haphazard the unemployment figure seems, perhaps the payroll report is a better indicator of employment rates.

Something of note here, re Job Loss under The Current Administration, yes indeed, more jobs have been lost, in simple numbers, on Bush the Younger's watch, than under any President since Coolidge. However, that is true of every President since Coolidge. The ratio of employed-to-unemployed shows no particular cause for alarm, in view of the expanding labor pool, and, in view of explosive population growth in the past generation, is a clear indicator of the substantial strength underlying the US Economy.

Scrat, It's good that we have shown job growth for one month, but the trend must remain on the upswing for several months before we are assured that the one month job growth is not a fluke. Also, I'm looking to the holiday shopping season to see if consumers are back buying goods and services that really shows growth.

timber, Historic employed-to-unemployed trends are important. No doubt. However, the current economy is much different than the world economy of President Coolidge. That's the reason why economics is not a science; because the variables change, and we are not sure what indicators should be prominent in our calculations from year-to-year. Many experts still disagree on whether the world economy is in a growth mode. Germany still has close to a ten percent unemployment rate. Japan's economy is not exactly booming. We shall see.

I believe I'm correct in saying that jobs growth lags economic growth by 4 to 6 months.

If job growth continues for say 3 to 4 months consecutively I wonder if C.I. will say ---- I told you so--I predicted that

perception, It's not a "I told you so" kind of speculation. I would love nothing better than to see job growth and true economic growth. We sitll have over 35 percent in equities. That means I have confidence in our economy. If I had none, our equity holdings would be close to zero - or about ten percent. What I see is a trend which shows Americans buying homes and cars, but sales on other consumable goods on a down trend. With 9 million Americans out of jobs, I don't see any quick recovery without the support of consumers. I'd like to find out where that 57,000 job growth was? What sector of our economy grew the jobs? I know that Sun Microsystems is laying off more people - in the thousands.

C.I.

I heard on the radio today (NPR) that the job growth was in temp hires but it also said a rise in the temp area is a precursor to permanent hires in other areas.

The really disturbing loss is in the manufacturing sector of the economy-----with high cost of labor and energy many manufacturing companies have fled to other countries such as China, India and Mexico just to name three. Textiles is just one portion of the manufacturing sector but it is evident that we just cannot compete against, cheap labor, no regulation, low regard for polution, gov't subsidy, no worker benefits, and gov't efforts to maintain weak currency.

IMO we should concentrate on creating new businesses( 57 % of all jobs are created by small business), and on those industries where we can compete on a level playing field such as Aircraft, High Tech, Biological and Medicine, Tourism , Specialty manufacturing , etc.

I believe it noteworthy that Timber is now going "long" on the economy and is willing to put his money where his mouth is-----how many of you doomsday experts are willing to do that? Not surprising because the "average" investor waits too long to buy and waits too long to sell.

from "Economics" 2nd Edition-Fisher Dornbusch- Schamalensee-

Quote- P. 602

"The notion that there should be some unemployment at full employment is a strange one unless we think about the fact that the economy is constantly changing with new jobs being created and old jobs destroyed and with people moving in and out of the labor market. There are always bound to be people out of work looking for a job, no matter how healthy the economy is on average."


and P. 602

quote

"The Actual and Natural Rates of Unemployment-
There is no certainty about the precise location of the range, but it is believed to be up from 4 to 5 % in the late 1960's to 5.5% to 6.5% in the 1980's"


Does anyone have any information from RELIABLE sources to contadict the above information.

If these Professors who wrote the Economics textbooks are correct, then wwe are within the
"Natural Rate of Employment" at this time( as compared to the 1980's)

Furthermore, according to Kevin Hassett of the American Enterprise Institute--"In the early 1990's , Unemployment fell so low that President Bill Clinton began a campaign to cut unemployment benefits from 30 plus weeks to 26.

THAT DANGEROUSLY "LOW' RATE WAS 6.8%


Now, was the 90's really that great?

Let's look at GDP.

Dean Baker from the George Mason University wrote on 12/24/01---

The most basic measure of economic performance is GDP growth. the US averaged 3.1 Percent annual GDP growth in the nineties. This beats the 2.9 percent rate of the eighties but doesn't come close to thje 3.7 rate of the fifties or the 4.4 rate of the sixties. In fact, it even trails the 3.3 rate for the seventies business cycle-

Italgato, I don't argue with the idea of some level of unemployment for even healthy economies. Where that range should be are only guestimates at best. The big picture I have observed is the loss of three millions jobs in three years. I do not see that as healthy for any economy, especially when our baby-boomers will be ready to retire in a decade or so when we will have more on social security than workers. When there is too much money in any economy, we will have inflation. That is a negative for any economy, because the buying power of our currency will become less, and the savings for most retirees will be become depreciated. We only need look at the current situation in Germany where unemployment is close to ten percent, and the government social programs is going bankrupt. No easy answers.

perception, If I were in my thirties, I would also go long. I've been retired for five years, and I do not plan to return to the work force for the rest of my life. Most of our retirment savings are in Cash, Annuities, and Bonds, and I sleep well every night. My nephew asked for advise on his investment strategy last week-end, and I told him he should plan for the long term and short term, and allow a certain amount for risk taking. He's a dentist and in this thirties.

Dys wrote:

"the Dys prediction, since I know nothing I am not charging for this prediction; in 6 months the DOW will hover in the 8500 range:"

Dys----I hereby call your silly prediction with my money---I'll give you 10-1 odds that the DOW will be closer to 10,000 than 8500 in 6 months from today.

How much of my money do you want?

Perception, I (because it was required by my graduate school) have taken one course in Macro Economics, I do not pretend to have any knowledge other than what that prof told me that all economics is, at best, a crap shoot. So you are right that I offer a silly prediction.

dys, That one lesson of your prof that "economics is a crap shoot" is key to understanding 'economics.' Many 'experts' think they know what the heck they're talking about, but most of us know it's mostly bullsh*t. I had macro and micro econonics during my undergraduate education. I think that's the reason why our Business Administration degree was a B.S..

Dys and C.I.

Since I never had the opportunity ot waste my parents money on either a post graduate or under grad education I 've had to rely on a "common sense" degree all my life so I wouldn't understand anything about "micro" or "macro" economics.