Where is the US economy heading

Given that total loan charge-offs/delinquencies are at the lowest rate they've been since Q3 '96, following 11 straight quarters of improvement - which constitutes the steepest - and longest sustained - decline of "bad paper" rates in over 20 years - (Source: US Federal Reserve - Federal Financial Institutions Examination Council), that while consumer spending is closely tracking overall GDP growth while consumer debt is lagging in comparison, that the ISM index is in its 19th straight month of growth, that corporate profits and earnings are at record levels, along with corporate reinvestment into infrastructure and operations, that productivity continues to increase at unparallelled rate, that both residential and commercial construction are at historic highs and exhibiting sustainably strong growth, that US home ownership and individual personal wealth are at aall time highs, that the Transportation Index shows the domestic transfer of goods and materiel is straining the available resources, that tax, inflation, and interest rates are at lows not seen in over a generation, that the current unemployment rate is well below the century-long average and has been declining for 6 straight quarters, and given that there is a robustly represented Republican Administration in place, among numerous other factors, I'd say the near-to-mid-term prospect is for continued GDP growth in the mid-single-digit range. The Economy is pretty much where I said, on a previous discussion thread a year-and-a-half or so ago here on these boards, and which I continually have been postulating, it would be at this point and in which direction it was heading. Lotsa folks have disagreed along the line, but the numbers have been workin' to the favor of my arguments all along - much the same as have my generally-disliked-but-proven-accurate projections of the outcomes of the US 2002, 2003, and the 2004 primary and general elections.

Spend, spend, spend, is the American Way. The refinancing of mortgages to take equity out of their homes have increased substantially during 2004, and it's expected to continue into next year. It was reported in this morning's San Jose Mercury News that it takes over $100,000 income to buy an average cost home in the bay area, but the average income is less than $60,000. We still see home prices increasing every year, and what I see is a bubble that can't be sustained forever, but I've been saying that for the past five years.

Timber.
Let me just plunge in. The engine or at least one of the major components that drove the economy since WW2 was manufacturing. It provided a stable economy and in many ways was responsible for the expanded middle class. That engine has sputtered and gone off shore with it's good wages and benefits. What it is being replaced with are low paying and diminished benefit jobs.
We seem to be heading towards a banana republic economy of rich and poor with a small middle class. Statistics are fine but they do not put bread on the table, a roof over ones head, medical coverage, send the young to college or all the other comforts of a good life. Job creation is barely able to keep up with the normal increase of people into the work force. As for replacing the jobs lost do to off shoring we can whistle Dixie.
In the years of the great depression there were shuttered manufacturing plants and low and behold we see them again.

Manufacturing remains a core, and growing, component of the US, and indeed of the Global Economy - a veritable keystone. Manufacturing output is at an all-time high, and continues with every report to notch ever upward. What is overlooked is that gains in manufacturing output are being driven by unparalled gains in productivity - fewer and fewer people are employed directly in manufacturing even as manufacturing output increases. A century ago, a similar paradigm shift in the place of agricultural employment within the overall economy began taking place. Today, a way-to-the-right-of-the-decimal-point fraction of people produce exponentially more agricultural product as compared to the way of things a century ago.

The absurdity of the "Lower paying jobs" claim is evidenced in that both the median and average US hourly wage, weekly wage, and monthly wage have never been higher, while both the median and average US workweek has actually declined. Prowl around some at the US Bureau of Labor Statistics.

Timber
Where in what industries do we find this expanded manufacturing. There has been and continues to be layoffs and plant closings. And the well paying factory jobs continue to flow off shore.

June’s Job Figures Show Manufacturing
Jobs in Decline

Manufacturing workers continue to take a beating, despite the U.S. Labor Department’s June report that shows a net increase of 112,000 jobs. U.S. wages are stagnant, and unemployment remained stuck at 5.6 percent, not counting workers who are discouraged and have ceased looking for employment.

A July 6 article in USA Today stated: "...manufacturers unexpectedly shed 11,000 jobs in June, as the workweek and wages declined." The newspaper also confirms that construction hiring was "flat" and that, while "overall employment has risen 1.2 percent, since [August, 2003], temp jobs are up 9 percent."

President Bush, speaking before business executives, applauded the June report as an indication that the economy is "steady and strong." He failed to mention that Wall Street economists predicted that 250,000 jobs would be created in June. The U.S. economy needs to add 346,000 jobs every month between now and January 2006 to close the job gap, a new report by the Federal Reserve Bank of Boston reveals. The job gap, according to "Understanding the Job-Loss Recovery," includes millions of jobs lost during President Bush’s presidency, as well as the number of jobs needed to employ people who have dropped out of the workforce and jobs to keep up with workforce population growth.

Bush also neglected to mention that, as the New York Times reported: "...take-home pay, as a share of the economy is at its lowest level since the government starting keeping track in 1929."

No one expects the President’s big money backers to lose much sleep over stagnant worker paychecks. But, with weakening retail and automobile sales, maybe a few will start to ponder the question: who will buy the goods and services that their companies sell?

You're missing the entire point, au. Manufacturing output - and revenue - is expanding across the board, driven not by increased manfacturing employment but by technologically-derived productivity gains and overall improvements in business efficiency. The "Missing Manufacturing Jobs" just plain no longer have a place or function in today's economy. The times have moved beyond the need for those jobs as "labor", just as a century ago the times moved beyond the jobs of those who labored at planting, tending, harvesting, and processing agricultural products. The jobs aren't going offshore, they, and the need for them, are going away. And all the talking-point hype to the contrary, more Americans are employed today than ever before in history, earning more money than ever before in history, calculated either as median or average, based hourly, weekly, monthly, or annually, as you prefer, while due to lower interest rates, lower inflation, and lower tax rates enjoying more disposable income, and due to productivity and efficiency improvements, they have more time of their own with which to enjoy that disposable income - thus driving the phenomonal strength of consumer spending.

The times they are a'changin' ... ironic it seems to be the "Progressives" who fail to see that. Yesterday is gone, today is here, and the future is on its way - like it, or understand it, or not .

au, Put another way, with the development and increased productivity from high tech, labor intensive production of goods and services for developed countries will continue to decrease. As timber has pointed out, agriculatural production has increased exponentially while labor has decreased. Fifty years ago, a big percentage of American production was agriculture and manufacturing. As the technology improved in how we produce goods, productivity continued to increase while labor continued to decline. Another industry that was huge fifty years ago was the garment industry. The US no longer produces much in the way of clothing, because it's cheaper to have them produced in third world countries. However, what we have gained from this change is that our cost remained somewhat flat. I can still buy a long-sleeved shirt for $10 - the same price I paid fifty years ago. If you look at the dynamic change of Japan's economy, you'll see the same thing. Right after WWII, Japan was known to produce cheap goods for Americans to buy, and they were also producers of garments. No longer. Japan is known for their electronics and automobiles. That is the reason it is important for our governments to improve our schools, because that's the only way we will remain competitive in the world markets.

Hehehehehe ... I remember when "Made in Japan" meant "Cheap Knockoff" ... those days are long, and forever hence, gone. An illuminating anecdote - the transistor was invented in the US - and initially was a delicate, single-purpose, limited-utility specific replacement for individual vacuum tubes in conventional circuits - a given transistor would be developed to handle the task of a given tube in an already-designed circuit architecture. The Japanese, chiefly the Japan Victor Corp (now JVC), through a research division which spun off to become Sony Corporation, pretty much came up with the idea of mass-manufacturing robust, multi-purpose transistors and, rather than designing transistors to suit a circuit, designing circuits to exploit the advantages of transistors. That sure changed things. In a hurry.

And then, of course, there were the "cheap Japanese cameras" of the '30s, '40s and '50s - today, Japan is in the forefront of imging technology, and has been since the middle 1960s.

That said, there's no need to consider the "cheap Japanese cars" of the '60s and '70s - Japan revolutionized the auto industry globally in less than a generation.

More to the topic at hand, Japan as well is at the forefront of manufacturing technology - their industrial robots are among the finest, most capable, most efficient in the world.

Timber/ C.I
No disagreement with anything either of you have written. My problem or question is where will our consumer economy get the dollars to buy the cheap shirts, Japanese cars and the like if we have nothing to sell. Where is the pot of gold for the American middle class to come from? Credit cards Max out. That by the way is something this government seems to have forgotten. The very real fear in that instance is that foreign investors will stop buying our paper and cash in that which they have. I also wonder about how long can an economy sustain itself if it imports far more than it exports?
Several economists have written about the very real likelihood of an economic Armageddon down the road.

I appreciate where you're commin' from, au, but I submit the concerns embodied in your querry are predicated on the doubly flawed appraisal that things are as they were and will remain so. Things are not as they were, nor will things remain as they are. Where for eons agriculture drove economy, over the past 2 centuries or so manufacturing came to supplant that role, and presently we are at the beginnimgs of the next stage, wherein it is information which drives economy. As the steam engine replaced the horse and the sail, so in turn did the internal combustion engine replace the steam engine, and just as the assembly line replaced the craftsman's cottage, the computer and its related technologies are replacing the assembly line as a place of employment. The production and consumption of goods remains, and expands, but no longer requires the labor component once it did, and as the labor required for production decreases, the need for workers to design and manage the technologies which are replacing the old jobs increases in logrythmic progression. The discoveries of the future doom the ways of the past. That always has been so. As we enter this new age, it is mankind's mind, not mankind's back, which will provide the means by which mankind sustains itself and, as ever, increases the level of comfort and security provided by that sustenance.

While I have no idea where things are headed in the long run, they've been headed this way since mankind figured out that a lever makes lifting things easier and set itself to the task of finding ever greater effort multipliers and efficiencies. "Manufacturing" is not on the decline, mankind is freeing itself from having to devote labor to the excercize. That is the future.

And I'll repeat it once again that our educational system must be second to none in order for us to compete in the world markets. It doesn't look too good right now for many reasons, but our economy still has the wherewithal to sustain our lead. Believe it or not, the devaluation of the US dollar in the world markets will be a substantial boost for the next few years. Another advantage we have is that we have a younger generation compared to the total population than the other developed economies. The aging population of Japan and Germany is going to create more of a handicap for their governments, as costs continue to escalate with less workers to pay for it.

Very good points, c. i.

The hype about outsourcing says that outsourced jobs are high-paying, while insourced jobs are low-paying. While anecdotal evidence may suggest this is true in limited areas, in the larger view, actual data reveals this to be false. Insourcing far outstrips outsourcing, and insources jobs, on average, pay higher wages than jobs with domestic companies. Here's a great link with stats broken down by state: Insourcing facts

The scare-tactics also ignore the benefits of outsourcing (cheaper goods, dollars go further, an indication of a strong economy, etc. ) Here's a source: outsource/insource facts

I do find it interesting that the same folks who gripe about outsourcing, tend to be the ones that support overly restrictive regulations that drive companies out of business, or out of the country.

Idaho, This is the way Bush won the election. Scare tactics works, because most people are too lazy to look for the truth.

That's one take, c. i. - another would be that The Nation and The World are fortunate a bare majority of The Participating US Electorate was able to see through the scare tactics and lies of The Opposition.

Timber
Or is it possible that the majority couldn't see past the scare tactics of those in power?

I thought we were talking about outsourcing/insourcing. Any more thoughts on that subject, or are we going to degenerate into political sqabbling?

Idaho, Sorry bout that! But, you know as well as anybody, that issues of false information not only impacts our economy but our politics as well. They are somewhat related; most people are too lazy to seek the truth.