Food Eater Lad

WASHINGTON - The U.S. economy, powered by a red-hot housing market and a huge dose of spending for the war in Iraq, grew at a surprisingly strong 3.3 percent clip last quarter and raised hopes for an even better performance the rest of the year.

The increase announced yesterday in the gross domestic product for the April-June period represented an upward revision from a 3.1 percent estimate a month ago.

Analysts said growth in the July-September quarter would be at a significantly higher rate, fueled by President Bush's newest round of tax cuts, which took effect in July, and continued low interest rates from the Federal Reserve, a combination that has helped to push auto and home sales to record levels.

"The economy is firing on all cylinders," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "The strong economic growth we are predicting in the future should create some new jobs." --Associated Press

Food Eater Lad

Earlier this month the French Finance Ministry announced proudly that the economy of France was set to grow by a total of 0.3% for 2003. Compare and contrast this with the following from Reuters last week regarding growth in the US economy: "Many forecasters anticipate [US] GDP growth is set to accelerate to rates of 4 percent or higher in the third and fourth quarters."

2wolves

The Washington Post, topping the Business Section, reports that defense stocks have topped out and are heading down.

Considering how much the local economy is defense oriented the Post is very pro defense industry.

2Wolves

HarmlessRabbit

Except the New York Times, the SF Chronicle, and several other papers. Damn that west coast liberal media.

http://news.google.com/news?hl=en&ie...nG=Search+News

It's too bad you don't have the integrity to post the whole story or even a link to it. Some highlights of what you left out:

http://www.kansascity.com/mld/kansas...ss/6871709.htm

And you have the audacity to claim that the media is ignoring the facts. You should be ashamed of your complete lack of journalistic integrity.

Macheath

I'm a little confused, what specifically does the French economy have to do with any of this?

rogue49

However on another note, they just announce spending went up and incomes went up.
And job unemployment has stablized or gone down.

But, this has to last more than one quarter, this has to be a sustained growth & recover.
The nation, economy & govt. still has much to work on.
There are still a significant amount of people out of work and hurting.

As the census figures have pointed out poverty levels have increased.
More needs to be done.

I have yet to see normal people at a decent comfort level.

And you cannot compare the US to France because our personal standards differ from their,
much of their country is still socialized, and has some security blanket.
This is not good or bad, just different...let's compare apples to apples.

chavos

"And job unemployment has stablized or gone down...I have yet to see normal people at a decent comfort level."

If someone has given up on seeking a job, of has accepted a lower wage position and is still seeking higher wages, that's not counted in jobless figures. Failing to count discouraged jobseekers is a major shortfall of the stats currently made.

I agree with Hrabbit...it is imperative to include the entire analysis, and to accurately portray media coverage. playing fast and loose with the facts isn't what we expect out of debate here.

onetime2

It's amazing how people bitch about an economy that's still growing. For years economists pointed out that the 5 to 6% growth rates we were seeing would not last (I know because I was one of those economists). Ditto the budget surpluses. The arguments over what to do with the forecasted surpluses amused the hell out of me since they all assumed we would continue to see unreal growth rates with little or no inflation.

The consumer controls the economy, not the stock market, not government spending, and most definitely not the President. If the economy sucks it's because the consumer is making it suck.

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chavos

If you couldn't get a job, or a job that would pay enough to provide for your family, wouldn't you bitch? Just because we have had a limited recovery, does not mean it has been a strong one.

Moreover, the consumer is not the sole control of the US economy. Buying provides short term stimuli, but unless worker productivty increases, there can be no long term economic growth. what provides worker productivity? Education and investment. Education is hard to quantify in these situations-its a longer term effect, and while many people are choosing to study over work, there is still the question of if they will have marketable skills.

However, easily quantified and studied is, investment in business infrastructure, and only in the last quarter did any of those numbers recover to modest gains from sharp negative numbers all through early 01. Source : http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm

Government spending is sharply up to 8.5% of GDP, an highly unsustainable number, with current taxation. Private domestic investment is still weak, creating stress on the loanable funds market that may be felt soon with higher rates, especially if the Fed cannot sustain such low rates on the overnight prime rate.

It's a mixed bag, with several signs that it will not last.

filtherton

Good, maybe if all you fools are lucky, I, the consumer, will get off my ass and start whipping this economy into shape. Just lemme get a job first. Wait, i meant a job that pays more than 7.50/hr. Alright, now let me try to save a little bit of money for my rainy day fund, maybe i'll try to save a little more for retirement. OK, everybody ready(two years later)? Let's Roll!!!

onetime2

The consumer accounts for 2/3 of GDP. Considerably higher than business spending, government spending or anything else combined. If worker productivity was so heavily influenced by infrastructure investment then why is it that worker productivity is among the highest ever when business investment is in the crapper?

Jobs are out there for those with the right skills. If you can't get anything better than $7.50 I would suggest building a new skill set.

<edit> the $7.50 comment is to the post beneath yours.

filtherton

I'm working on it.
However, even those with the "right" skills get laid off to save the company a few bucks. They then can look forward to 3+ months looking for a new job. Living off severance is a great motivation to spend money.

Besides, I thought stock prospectors were responsible for recessions. They were responsible for the great depression, right? Or was it the consumer there too? Overinflate everything and then burst the bubble. Isn't that the way things go?
The consumer is the one who pulls us out of recessions. It's the people who gamble on the stock market and/or inflate financial statements who cause them.

onetime2

Glad to hear you're working on it. There are a lot of people out there who aren't. Employees with the "right" skills won't be out of work for long. They may not be making what they made when the economy was booming, but the vast majority will be able to get by with some belt tightening. For many years the labor market was an employee's market. Business needed employees and there were few to be had. This pushed pay and benefits up to attract or keep employees. Now, it's an employers market. Pay and benefits are down, even those with steady jobs will not likely be seeing much in the way of salary increases and corporate attitudes are more in the "you should be grateful you have a job" spectrum than in the "we really want to keep you" realm.

Stocks are only one form of bubble, there are many others. The housing market/real estate investment are examples of a couple of others. Depressions are entirely different than just a slow economy. The reason that this downturn feels so bad is the fact that the growth we saw over several years was so huge. A large part of that growth was fed by the refinancings in real estate and the money made in the stock market.

Consumers felt more rich than they did in the past because their home values were shooting up, they were saving in the form of 401ks, IRAs, etc, and they had other investments in the stock market which were doing well. This enabled them to spend. That spending is what allowed our economy to go from around $7 trillion 4 years ago to $10 trillion today.

None of this is helpful to those without jobs right now but it does show that having many skillsets helps to insulate you from the effects of a downward economy.

IMO, downturns can create great opportunities. There are industries that continue to grow even when the economy is in really bad condition (which it isn't right now). An example is anything in the service industry. Landscape maintenance/construction, housekeeping, etc are all in demand. The jobs associated with them aren't the greatest paying or the most glamorous but who says you need to do them? Why not start your own business? Slow equipment sales and low interest rates combine to make it pretty low-cost to get into the market and there's plenty of opportunity to make money.

There are other examples of this out there. But hey, that's just my opinion and something that I would consider if I came in tomorrow to find out my job was eliminated. In reality no one is safe but if you have back up plans you're be a hell of a lot better off than your peers who have none.

--Paul

chavos

Most returns are not immediate. A new factory bought a few years ago will still be producing productivity gains as it reaches peak efficiecy. Education completed prior to this date will still be giving dividends now. however, ignorance of weak investment in infrastructure and education can only lead to problems down the road.

Stong productivity gains are currently coming from layoffs...as more inefficient workers are fired, and the rest are scared in to working off the clock, etc... This is unsustainable. Firing can only bring up productivity for a short while...and then we're facing a serious situation where there are a lack of jobs, and a lack of producivity increases to provde for a higher standard of living.
Source: http://www.bls.gov/news.release/prod2.nr0.htm
Table A

onetime2

Your assumptions are off base. Layoffs do not typically target the inefficient workers and the effect of layoffs on the remainder of employees is far from making them more productive. They are forced to cover more areas and work on things they have no experience with. Firing does not improve productivity.

Technology and training are the two biggest productivity improvers. It takes most new factories quite a while to surpass the old ones in efficiency as there are always growing pains. Without consumer demand no one will be buying the goods producd by that new state of the art factory.

HarmlessRabbit

Funny, I've seen new posts from Food Eater Lad but he hasn't replied. I guess he's too embarassed.

seretogis

Perhaps you should PM him instead of waving your virtual-dick around in the Politics forum?

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Food Eater Lad

LOL Embarressed by what? The growth of the economomy And the fact that the liberals are loosing what little crediblity they had? All I did was post something as watch the rationalisations fly.

chavos

No. That's not right. It does not necessarily increase productivity, but it often does.

http://papers.nber.org/papers/w9530

Basic econ 101 here. When you go to do layoffs, you fire your most inefficient, least productive laborers. Average productivity rises, overall output is usually lower. Morale is certainly an issue, especially in white collar positions. But don't tell me that a service busines, like a resturant won't try to keep the same number of tables even if they have to fire a waitress. Google for "jobless and recovery" or "productivity, increase, and layoff". Also, try looking around at Nber.org, a site with working papers by some of the top economists in the feild. You'll see what i'm talking about.

You make a fair point of on-job employee training, but you miss the point about technology. Spending on technology is NOT an operating expense. It is an investment, a purchase of a durble good. Those purchases are not recovering like we might hope...
http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm

It's table one. Only in the last quarter has there been any recovery, and it's got a ways to go still.

HarmlessRabbit

I have no PM's from you.

Pot. Kettle. Black.

Food Eater Lad

So it sounds like the economy IS on an upswing then? So whats your problem Silly Rabbit?

HarmlessRabbit

That you left out most of the story, all the negative information, and didn't even leave a link where people could get the full story.

You complained in an earlier post about Michael Moore doing the same thing, twisting information to suit his needs.

So, my problem is that you are a huge hypocrite.

Food Eater Lad

LOL So there wasnt a growth then this quater? The ecomony is not on an upturn? Gee, I guess I must have made it up LOL

Lebell

All right everyone.

I think we can all agree on two things.

There was growth this quarter and;

FEL did not include the full story, which included bad news on the economy.


Now that we've established that, lets move the conversation forward.

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onetime2

First off, Basic econ 101 doesn't exactly cover the real world. There are many constraints on who you can get rid of. Firing the least efficient in theory is what should happen. But that's not usually the case. Tenure, contracts, likelihood of lawsuits, etc are all things used to determine who will be fired.

Second, firings hurt blue collar morale as much as white collar.

Third, I never said spending on technology was an operating expense the point was that without consumers buying products (or the strong belief that they will) companies will not invest in it.

The fact is that the consumer drives the economy. Anything that upsets the consumer screws the economy. High interest rates, rising inflation, massive layoffs (much higher than the ones we've seen which push unemployment well above the levels we have now), etc will cool the economy a hell of a lot quicker than anything to do with government spending, business investment, etc. That's basic economics both in the real world and in theory.

chavos

Okay? Productivity and employment are negatively related in the short term. You cut short run costs by layoffs, becuase all your other costs are sunk or fixed already.

second, i'd wager that blue collar tends to have somewhat less control over thier amount of output with relation to their morale. but that's not really even the issue...so never mind.

third...you miss the point-the reason why i talked about how tech spending is an investment, because investment spending is still low. and that spending, NOT THE CONSUMER, is what drives productivity gains. And productivity gains, AND NOT THE CONSUMER, is what drives long term economic growth. Which was my point in the first place...

Consumption obviously has to take place to direct the market economy, but simply using up resources cannot be the basis of the economy...it is the rate at which we produce resources/products that determines the standard of living.
http://www.dallasfed.org/eyi/usecon/0003growth.html

Lets think through this. Labor costs are fixed, short term. Production amounts are not. If demand rises, due to increased consumption, production will rise because each unit is giving additional profit. However, with higher demand comes higher prices. Higher prices demand cost of living adjustments, higher wages. So, the firms aren't making the increased profit...they cut back on production to stay in budget with the pressure of higher wages. End result? Wages up, costs up, real wages equal. No increase of standard of living.

See? Despite the intuitiveness of it, the consumer is not capable of driving real wage gains, only temporary effects.