Damned slow economy. Only grew at a 7.2% rate in Q3! - Tilted Forum Project Discussion Community

onetime2 · 10-30-2003, 08:11 AM

http://money.cnn.com/2003/10/30/news...ex.htm?cnn=yes

GDP growth surges 7.2%

Broadest measure of economic growth at strongest pace in 3Q since first quarter of 1984.
October 30, 2003: 10:32 AM EST

NEW YORK (CNN/Money) - U.S. economic growth surged in the third quarter of 2003 to the fastest pace in nearly two decades, the government said Thursday, in a report that was much stronger than most economists expected.

Gross domestic product (GDP), the broadest measure of economic activity, grew at a 7.2 percent annual rate in the quarter after growing at a 3.3 percent rate in the second quarter, the Commerce Department reported. Economists, on average, expected GDP growth of 6 percent, according to Briefing.com.

"This is obviously an extraordinarily strong report, led by the consumer, but also with good signs about the state of the business sector and business confidence," said Lehman Brothers economist Drew Matus.

The burst of GDP growth was led by a 6.6 percent growth rate in consumer spending, the fastest pace since 1988. Consumer spending grew at a 3.8 percent pace in the second quarter.

Child tax credit checks and lower rates of income tax withholding helped fuel the third-quarter spending surge, enabling the Bush administration -- which pushed for tax cuts earlier this year -- to take a victory lap Thursday morning.

"Today's report on real GDP in the third quarter shows that the president's economic policies are having a positive impact on the economy," Treasury Secretary John Snow said.

But U.S. stocks fell in early trading after the report, the strength of which was already expected by many traders. Treasury bond prices also fell, pushing interest rates higher, since bond yields and prices move in opposite directions.

Still few jobs
Many economists expect the impact of the tax cuts to fade in the fourth quarter, and the cash flow from mortgage refinancings, another boon to third-quarter economic growth, is expected to diminish as well. As a result, most economists expect a slower pace of GDP growth, about 4 percent, in the fourth quarter.

A decline in business inventories in the third quarter, however, could mean GDP will get a boost in the fourth quarter, if and when businesses re-stock their shelves.

"The plunge in inventory accumulation does suggest that firms are not confident enough to add merchandise to their shelves," said Anthony Chan, chief economist at Banc One Investment Advisors. "But they will not be able to do this indefinitely because everyone knows that sporting empty shelves in an rising growth environment is not prudent."

In a separate report, the Labor Department said new weekly claims for unemployment benefits were still relatively high in the week ending Oct. 25, pointing to the Achilles' heel of the strengthening economy: a sluggish job market.

In fact, during a quarter with the strongest growth rate since 1984, non-farm payrolls shed a total of 41,000 jobs, according to Labor Department statistics, in part because of strong productivity growth, which enables companies to get more work out of fewer workers.

But job growth is typically a lagging economic indicator, and most economists hope that continued strong demand will eventually catch up with the recent gains in productivity and lead to sustained job growth.

"Since no new jobs were generated in the third quarter, the growth story is entirely based on productivity," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "The good news for workers is that productivity growth cannot continue at this pace. Demand will translate into jobs very soon, and in fact I think it's happening right now."

"But that's still largely a hope, not a certainty," Cheney added.

Cars, homes lead the charge
Much of the strength in consumer spending in the third quarter was in durable goods, items meant to last three years or more, and much of that strength was in sales of motor vehicles and parts, which alone contributed 1.17 percentage points to the total pace of GDP growth.

Record home sales also contributed to GDP growth in the quarter; residential investment boomed to a 20.4 percent annual pace, compared with 6.6 percent in the second quarter. Residential investment contributed nearly a full percentage point to the total GDP growth rate.

Nonresidential fixed investment rose at a 11.1-percent annual rate, following the second quarter's 7.3 percent pace, a sign of continuing strength in business spending. Investment in equipment and software rose at a 15.4 percent pace, compared with 8.3 percent in the second quarter. Spending on equipment and software contributed 1.18 percentage points to the total GDP growth rate.

Weakness in imports -- which subtract from GDP, since they represent goods and services bought from other nations -- also helped total GDP growth. Imports grew at just a 0.1 percent pace in the quarter, while exports surged at a 9.3 percent growth rate.

Government spending, which contributed mightily to the second quarter's growth rate, slowed down. Defense spending, which grew at a 45.8 percent pace in the second quarter, driven by spending on the war in Iraq, was flat in the third quarter.

The personal consumption expenditure price deflator, an inflation measure closely watched by the Federal Reserve, rose to 1.7 percent from 1.0 percent in the second quarter.

The Fed recently left its target for its key short-term interest rate unchanged at levels not seen consistently since 1958, saying the recent surge in economic growth had not changed its outlook for inflation. The Fed has maintained for several months that it is worried about inflation getting too low, which could hurt corporate profits and economic growth.

"We believe that the Fed will require both consistent solid hiring and a rise in inflation before it begins to lift rates," said UBS Warburg chief economist Maury Harris.

Would be nice if a few other sectors (unemployment for example) would pick up a bit more. But overall an impressive showing from the consumer.

Liquor Dealer · 10-30-2003, 08:23 AM

I'm sure that the only reason for this growth is a result of the many fine candidates vying for the Democratic nominations continued efforts to inform the American people of how bad things really are. If it goes up a few more points I am sure that many will tell you that this is most definitely grounds to start an immediate recall petition to get rid of the current administration before uncontrolled growth gets our econoimy into such a mess that they have absolutely nothing left to bitch about.

Ustwo · 10-30-2003, 08:28 AM

I'd give 2 weeks pay to know what the 9 dwarves REAL reaction to this news was.

I knew the economy was getting better at least locally. Its been a shopping frenzy out here for the last few months. At the Oak Brook mall, one of the best malls in the US for quality stores, I had to park out in the outter rows of parking where you normally never have to park unless its almost Xmass. Stores like best buy and the like were total zoos as well. Obviously this is all anecdotal, but it is amusing in light of the new numbers.

onetime2 · 10-30-2003, 08:31 AM

Quote:

Originally posted by Liquor Dealer
I'm sure that the only reason for this growth is a result of the many fine candidates vying for the Democratic nominations continued efforts to inform the American people of how bad things really are.

Hmmm, interesting theory. If nine candidates helped us grow at 7.2% will 90 candidates help us grow by 72%?

2wolves · 10-30-2003, 08:50 AM

With tongue planted firmly in cheek...... since the economy of the Clinton era was the result of the Raygun/Bush the Elder's planning (according to some) then this coming boom (-cough-) has to be the work of Clinton. Correct?

2Wolves

Food Eater Lad · 10-30-2003, 09:03 AM

Nope 2 wolves, since the last year of CLinton's tenure the econonmy declined. Clearly the ride from internet speculation was over. This rise can not be credited to Clinton.

Ustwo · 10-30-2003, 09:12 AM

Quote:

Originally posted by 2wolves
With tongue planted firmly in cheek...... since the economy of the Clinton era was the result of the Raygun/Bush the Elder's planning (according to some) then this coming boom (-cough-) has to be the work of Clinton. Correct?

2Wolves

Hehe, I was thinking they would spin it somehow like that too. We know its bogus since the economy was on the upswing when GHB left and down when Clinton left, BUT I'm sure they will try.

eple · 10-30-2003, 09:37 AM

Jesus this is ridicolous. Conservatives and Democrats never stop arguing who's president rescued and who destroyed the economy, and noone can prove a thing. It is all word agains word. Could we just declare this a none-issue? Until someone is able to come up with undeniable proof, can't we all just call it a draw, and skip the entire political pissfight where noone wins? Just be glad that the economy is on the rise, don't try to spin it either way.

2wolves · 10-30-2003, 09:45 AM

So much for an attempt at light humor. (I could have sworn I put in the 'toungue in cheek' bit)

And so it goes....

2Wolves

2wolves · 10-30-2003, 09:47 AM

Quote:

Originally posted by eple
Jesus this is ridicolous. Conservatives and Democrats never stop arguing who's president rescued and who destroyed the economy, and noone can prove a thing. It is all word agains word. Could we just declare this a none-issue? Until someone is able to come up with undeniable proof, can't we all just call it a draw, and skip the entire political pissfight where noone wins? Just be glad that the economy is on the rise, don't try to spin it either way.

I blame it all on Antonio Bandares! or maybe my sister's ex-husband.

2Wolves

Ustwo · 10-30-2003, 09:52 AM

Quote:

Originally posted by eple
Jesus this is ridicolous. Conservatives and Democrats never stop arguing who's president rescued and who destroyed the economy, and noone can prove a thing. It is all word agains word. Could we just declare this a none-issue? Until someone is able to come up with undeniable proof, can't we all just call it a draw, and skip the entire political pissfight where noone wins? Just be glad that the economy is on the rise, don't try to spin it either way.

I basicly agree with you. The problem is that taxes/new regulations often don't have an effect for a few years and that makes it hard to prove what the causes of a up/down turn was.

eple · 10-30-2003, 09:52 AM

Man, I knew there was something dodgy about your sister's ex-husband, the way he used to flinch when we mentioned the economy sould have tipped me off...

Food Eater Lad · 10-30-2003, 09:56 AM

Where is Harmless Rabbit to explain how this isnt really happening?

onetime2 · 10-30-2003, 10:15 AM

Quote:

Originally posted by eple
Jesus this is ridicolous. Conservatives and Democrats never stop arguing who's president rescued and who destroyed the economy, and noone can prove a thing. It is all word agains word. Could we just declare this a none-issue? Until someone is able to come up with undeniable proof, can't we all just call it a draw, and skip the entire political pissfight where noone wins? Just be glad that the economy is on the rise, don't try to spin it either way.

Hey I'm conservative (well not really, but compared to HR and others I am) and I've always maintained that the Pres has nothing to do with the economy.

As far as it being a non-issue, I wish it were possible but the party not in power will always try to spin the economy as the fault of those in power.

onetime2 · 10-30-2003, 10:17 AM

Quote:

Originally posted by 2wolves
I blame it all on Antonio Bandares!
2Wolves

So it's the foreigners!!!! Now we gotta talk about immigration.

Food Eater Lad · 10-30-2003, 10:31 AM

So what are the democrates going to do now that the ecomony is growing so fast? This must be the worst news they have heard since declaring their bid for presidency?

onetime2 · 10-30-2003, 10:42 AM

Quote:

Originally posted by Food Eater Lad
So what are the democrates going to do now that the ecomony is growing so fast? This must be the worst news they have heard since declaring their bid for presidency?

I'd say they have to focus more on Iraq, Afghanistan, the "where are Saddam & Osama" questions, and maybe even Homeland Security while keeping up with questioning around the unemployment rate and downplaying this news as a one time blip. They can't afford to let the economy go as an issue entirely and will have to gamble that the growth will go down prior to the election. Todays news doesn't get Bush out from under all economic questions, it just takes a few months away from the Dems ability to use the economy to cut into his popularity.

Astrocloud · 10-30-2003, 10:44 AM

Are we reading the same article?

Moderater please forgive me as I repost a paragraph or two that many here seemed to have skipped

Quote:

In fact, during a quarter with the strongest growth rate since 1984, non-farm payrolls shed a total of 41,000 jobs, according to Labor Department statistics, in part because of strong productivity growth, which enables companies to get more work out of fewer workers.

But job growth is typically a lagging economic indicator, and most economists hope that continued strong demand will eventually catch up with the recent gains in productivity and lead to sustained job growth.

"Since no new jobs were generated in the third quarter, the growth story is entirely based on productivity," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "The good news for workers is that productivity growth cannot continue at this pace. Demand will translate into jobs very soon, and in fact I think it's happening right now."

"But that's still largely a hope, not a certainty," Cheney added.

Gentlemen, the devil is in the details.

2wolves · 10-30-2003, 10:46 AM

Quote:

Originally posted by Food Eater Lad
So what are the democrates going to do now that the ecomony is growing so fast? This must be the worst news they have heard since declaring their bid for presidency?

A single quarter is not exactly what I would call a significant period. We'll see in time and there's no use in forecasting unless one of the Tilted regulars is an economist of flawless insight.

2Wolves

Ustwo · 10-30-2003, 10:51 AM

Quote:

Originally posted by Astrocloud
Are we reading the same article?
Gentlemen, the devil is in the details.

Oh my goodness, people are working hard?!

*gasp* how horrible.

onetime2 · 10-30-2003, 11:07 AM

Quote:

Originally posted by Astrocloud
Are we reading the same article?

Gentlemen, the devil is in the details.

Apparently not, what's your point? Productivity has been on the rise for a long time. When workers are more productive that means companies can get by with fewer employees so long as the increased demand is less than what increased productivity generates.

Meeting the needs of a moderately growing economy can be accomplished in the short-term with current employment levels but to meet the demands of a fast growing economy, more workers will be needed.

As far as your outlining of the word "hope" well there are no guarantees in economic forecasting.

Food Eater Lad · 10-30-2003, 11:10 AM

This is three quaters in a row the economy is rising, 2 wolves. Sorry to burst your bubble. I know you would prefer a soft America.

Astrocloud · 10-30-2003, 11:18 AM

Quote:

Originally posted by onetime2
Apparently not, what's your point?

My point is that the real world economy isn't as Hunky Dorey as some would have us believe. If you want to claim that the economy is on the rise, dandy. Don't expect others to swallow until we see some definite change in the evironment.

Many American companies, (like my student loan company for instance: Sallie Mae), have outsourced their customer service to India. I can see that this is monetarily good for them and could lead in a rise of profits. However, this doesn't necessarily mean that everything is good for those outsourced American workers.

I'm not a protectionist but don't quote numbers until the American people see results. (And if one person on here or another is reaping the benefits of the Jobless recovery... go ahead and gloat a little... But don't expect everyone here to find your argument so convincing).

onetime2 · 10-30-2003, 11:24 AM

Quote:

Originally posted by Astrocloud
My point is that the real world economy isn't as Hunky Dorey as some would have us believe. If you want to claim that the economy is on the rise, dandy. Don't expect others to swallow until we see some definite change in the evironment.

Many American companies, (like my student loan company for instance: Sallie Mae), have outsourced their customer service to India. I can see that this is monetarily good for them and could lead in a rise of profits. However, this doesn't necessarily mean that everything is good for those outsourced American workers.

I'm not a protectionist but don't quote numbers until the American people see results. (And if one person on here or another is reaping the benefits of the Jobless recovery... go ahead and gloat a little... But don't expect everyone here to find your argument so convincing).

Oh so now there's a "real world" economy. I'd better let the Fed know. Here they thought they were capturing the economy by measuring GDP, foolish them.

As far as outsourcing jobs. Nothing new. It's been done to countless other industries. That's the nature of allowing foreign trade and selling public shares of companies. The stockholders want costs to be lowered. It's certainly not the President's fault that you chose the wrong profession.

As far as quoting numbers before the "American people" see the results, you were the one clamoring for quotes in the other economic posts and just because you don't like this one, you want to disregard it. The majority of the American people are seeing the results. That's why they're spending their money. That's why they're buying new houses and new cars and investing in the stock market.

onetime2 · 10-30-2003, 11:26 AM

Quote:

Originally posted by Food Eater Lad
This is three quaters in a row the economy is rising, 2 wolves.

Actually it's been 8 quarters in a row.

Astrocloud · 10-30-2003, 11:44 AM

Quote:

Originally posted by onetime2
Oh so now there's a "real world" economy. I'd better let the Fed know. Here they thought they were capturing the economy by measuring GDP, foolish them.

Thanks for the flame.

Quote:

It's certainly not the President's fault that you chose the wrong profession.

What?? Way to bring the conversation to a personal level. Yeah, that's really convincing. Nice flame there.

When did I even bring up the President in this thread?

Quote:

That's why they're spending their money. That's why they're buying new houses and new cars and investing in the stock market.

It's possible that they're doing that because interest rates are low. See this article; personal debt is on the rise; according to the article

http://www.ohio.com/mld/ohio/business/6959927.htm

Quote:

U.S. consumer debt expanded in August as Americans took out loans for cars and tapped credit cards for more cash while mortgage refinancing slowed, Federal Reserve statistics showed.

If you've read the Bloomberg article on the same subject, you'd know that they're blaming the growth in the economy on an increase in consumer credit, among other things. It has to be paid back sometime... perhaps we the vast unwashed can now get jobs as loan managers -since that's where the economy is picking up.

onetime2 · 10-30-2003, 12:02 PM

Quote:

Originally posted by Astrocloud

It's possible that they're doing that because interest rates are low. See this article; personal debt is on the rise; according to the article

If you've read the Bloomberg article on the same subject, you'd know that they're blaming the growth in the economy on an increase in consumer credit, among other things. It has to be paid back sometime... perhaps we the vast unwashed can now get jobs as loan managers -since that's where the economy is picking up.

You brought up all the points I responded to.

Interesting that your argument has now shifted to consumers borrowing too much when you down played the consumer impact in every other economic discussion we've had.

If you want to look at consumer debt you need to look at the other side of the balance sheet and look at their assets. While debt has risen (as I've discussed in our other posts) the values of their homes and stock portfolios have risen faster.

Go ahead and try to spin the 7.2% growth into a bad thing, no one will buy it. The consumers are buying because they're confident. If they weren't confident they wouldn't spend, even if interest rates were low. Check out Japan's interest rates and their level of consumer spending while money was virtually free over there. Without the consumer the economy is nothing.

Ustwo · 10-30-2003, 12:51 PM

Who wants to bet the tilted left would be saying how horrible Bush was had the figures been reversed

This is basicly a 'haha' moment.

Astrocloud · 10-30-2003, 01:21 PM

Quote:

Originally posted by onetime2

Interesting that your argument has now shifted to consumers borrowing too much when you down played the consumer impact in every other economic discussion we've had.

This is called a straw man argument. Look it up.

Astrocloud · 10-30-2003, 01:32 PM

Quote:

Originally posted by Ustwo
Who wants to be the tilted left would be saying how horrible Bush was had the figures been reversed

This is basicly a 'haha' moment.

Could you please fix your grammar so that everyone else can share in your "haha moment".

Ustwo · 10-30-2003, 01:34 PM

Quote:

Originally posted by Astrocloud
Could you please fix your grammar so that everyone else can share in your "haha moment".

Pardon me for the quick typos.

BTW, HAHA, Bush is going to win in 2004.

jimk · 10-30-2003, 01:57 PM

as someone in the futures pits, i think a number that strong with no rally is quite bearish. people are getting worried that this mild bull run has been coaxed out of the market by every stimuli they could throw at it. bush's guys have thrown everything they had on the fire. time to see if the bull can stand on its own.

HarmlessRabbit · 10-30-2003, 02:12 PM

On NPR today an analyst said that the growth was likely a bubble from the consumer, fueled by people receiving their one-time tax checks. The analyst doubted that the GDP growth was sustainable.

So, you basically have a one-time bubble that we have to pay for later when the bill for our record deficit comes due in the future.

Here's a less rah-rah analysis of the numbers from a qualified source

http://www.washingtonpost.com/wp-dyn...2003Oct30.html

Quote:

U.S. Economy: Long-Term Recovery or Short-Term Blip?

Frederick L. Joutz
Associate Professor of Economics, The George Washington University
Thursday, October 30, 2003; 2:00 PM

The economy expanded at a 7.2 percent annual rate in the third quarter. The fastest growth in 19 years was fueled by a surge in consumer and business spending amid tax cuts and low interest rates. Earlier this week, the Federal Reserve signaled that it's inclined to keep rates low for some time to come.

Will the economy be able to sustain its sizzling expansion and when will economic growth translate into job creation? George Washington University economist Frederick L. Joutz was online to answer those questions and more. A transcript follows.

About Joutz

Joutz has been at The George Washington University since 1988. His areas of interest are macroeconometrics, energy economics, time series, and forecasting. He is associate editor for Energy Economics and the International Journal of Forecasting.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

________________________________________________

Frederick L. Joutz: Thank you for joining the washingtonpost.com discussion about the recent GDP data. I look forward to your questions and will try to answer them.

Fred Joutz

Department of Economics

The George Washington University

_______________________

Washington, D.C.: Correct me if I'm wrong but this quarter's jump in GDP was driven mostly by personal consumption and business investment. Does this mean that companies are interested in growing once again, thus hiring will pick up?

Frederick L. Joutz: Firms have not begun to respond to the increase in economic activity. They have been in a wait and see mode and drawn down inventories. The increase in personal consumption and business investment is a very good sign. Consumption was driven by durable goods expenditures particularly in the automotive sector. Some of this may have been due to end of year sales.

_______________________

Dulles, Va.: The economy has been showing signs of growth for several months, but the general view in the public is that things are still pretty bad. Why the big discrepancy between public perception and GDP?

Frederick L. Joutz: There has been a slight recovery taking place the last 2 quarters. Public perception has been held down by the fact that unemployment is still high, 6.1%, and that until last month firms had not been hiring. There have been a war effect and concerns about future scandals in the financial sector and corporate governance.

_______________________

Angers, France: If possible, could you give us some idea of the proportions of the growth for "normal" increase and "war-related", i.e., defense spending. Is this growth being artificially driven by government or tax payer related spending ?

Thank you.

Frederick L. Joutz: The GDP release by BEA today suggests that federal government and defense expenditures were basically flat in the 3rd quarter. Thus, they do not appear to have directly effected the economy.

Defense expenditures did surge by 45% in the 2nd quarter and federal expenditures increased by 25%. Thus government expenditures were important contributors to the 3.3% growth rate in the 2nd quarter. But they have not contributed to the 7.2% released today.

_______________________

Annapolis, Md.: Are there historical instances where a strong GDP rate in one quarter failed to play out into longer-term growth?

Frederick L. Joutz: Typically the US economy has experienced rapid growth coming out a recession; the exception was the early 1990s.

There have been instances where the economy has experienced what is referred to as a double dip recession. This occurs when the economy grows for 1-2 quarters after a recession only to fall back into one. There had been concern that the current recovery was weak enough that we could experience another one.

Given the recent employment growth and real GDP growth rate from the last two quarters, I believe the likelihood of the US economy falling back into a recession is slim.

It is always important to not hang your hat or interpret one quarter' or one month's data release on a trend. One should compare where the economy was 6-12 months ago.

_______________________

Washington, D.C.: With the globalization of economies, how accurate a read on the health of the economy is gdp these days? I know gdp factors in trade balance but can gdp accurately measure growth of the U.S. economy, if many businesses are multinational and have revenues tied up overseas.

Frederick L. Joutz: The GDP numbers put out by BEA are the best measure we have of broad economic activity. The numbers released today report on the consumption expenditures on durable goods, services, and non-durable goods, business expenditures on plant and equipment including software, computers and IT equipment, government expenditures and the net exports.

The later captures what we are able to sell to foreigners minus what we purchase from them. This past quarter, the US actually narrowed the gap. We have been purchasing far more than we have been able to sell. Exports to the rest of world rose by almost 9% while imports were flat!

This is a good sign. Also, recently the US dollar has depreciated recently against a number of currencies. Eventually this should make US products more price competitive. Of course, this means that imports of foreign goods like beer wine, leather goods, and some automobiles will be more expensive. This could lead to employment growth.

_______________________

Washington, D.C.: Do you think the good economic news will result in increased employment and help President Bush's re-election prospects?

Frederick L. Joutz: Higher spending by definition means greater revenues for firms. If they believe that demand is sufficiently strong and will continue, managers will hire more workers.

The strength of the economy is an important factor in presidential elections. Voters translate economic well-being onto their leaders. At this point President Bush's re-election prospects are vulnerable to the fact that the number of full time workers is about 2 million less than when he took office.

_______________________

Washington, D.C.: Dear Mr. Joutz,

How much of the 7% growth is actually attributed to government spending? Isn't it true that corporate investment that actually does lead to job creation has still not gained sufficient momentum to bring unemployment down? And in case it does grow in a sustainable manner, how much of it will be fizzled away for servicing the country's growing debt burden?

Frederick L. Joutz: Government spending at the federal state and local level is an important component in overall. Real GDP in 2003 is about $9,800B; government spending is about $1,800 or about 18% of total spending.

Of the later amount about 1/3 is federal spending and 2/3 is state and local.

The federal government helped the 3.3% GDP growth in the 2nd quarter of this year, because it increased by about 25%. However, in the 3rd quarter, federal spending was essentially flat and did not contribute to economic growth

_______________________

Louisville, Ky.: The tax cuts and mortgage refinancing had a good hand in today's figures. Once the cuts wear off, and the job situation remains almost static, these figures don't seem to give an accurate picture of how difficult the job situation is. Any possibility that increased GDP will result in new jobs (outside of the lower-paying ones)?

Frederick L. Joutz: Economic growth has been helped monetary policy with low interest rates helping to finance residential construction. The tax cuts have provided some contribution as well - how much is subject to debate.

Employment and the prospect of future employment are crucial to spending decisions by consumers. If firms perceive the economy is going to grow, they will begin hiring more workers.

I do not have the exact numbers, but the number of jobs grew about 60,000 last month. That translates into over 700,000 over a year. The number of people applying for unemployment benefits has fallen from the first 8 months of the year in the 450,000 range to about 370,000 today.

The unemployment numbers are the result of flows of people who are hired in a month, those who lose or leave jobs in a month. If flows in exceed flows out of jobs, then employment increases.

_______________________

Bethesda, Md.: Has the Federal Reserve, in cutting rates all the way down to 1 percent, lost its ability to stimulate the economy with monetary policy? And given the GDP numbers released today, are we likely to see the Fed raise rates at its next FOMC meeting?

Frederick L. Joutz: This is the $64 million question.

The Fed has suggested it is willing to keep interest rates low for a "considerable" period at its last two meetings.

The FED policy makers have been concerned about their effectiveness to only control short term interest rates. They have been conducting research on how to affect long term interest rates by purchasing 10 year Treasury securities and the effect this will have on credit markets.

One response to the GDP release today is that the Bond market has reacted negatively. Strong economic growth generally leads to the FED raising interest rates (taking the punch bowl away from the US economy). The credit markets participants are thinking the FED will have a short
"considerable" period.

_______________________

Arlington, Va.: Can this news be attributed to anything in particular? For example, the stimulus bill Congress passed earlier this year?

Frederick L. Joutz: I do not think the news today can be attributed to any one factor and would attribute the strong growth to one government action.

Spending increases depend on the confidence of consumers and firms that they will continue to have jobs (and income) and that revenues will come in.

_______________________

Poolesville, Md.: At what rate of economic growth can we expect a balance between revenues and expenditures or a balanced budget?

Frederick L. Joutz: We are unlikely to see a balanced budget for several years. The Congress would need to make decisions requiring a combination of reducing tax cuts and reducing spending. I would not be surprised if there is a 2nd term for President Bush, that we will see a tax (or revenue) increase. Yes I am serious

I would check out the Congressional Budget Office web-site www.cbo.gov. They conduct analyses like this.

_______________________

Frederick L. Joutz: Thank you for contributing to the forum on the economy. There was not enough time to answer all the questions and go into enough depth.

I have students knocking on my door for office hours and need to answer their questions.

Again, I enjoyed our brief discussion.

Fred Joutz

Food Eater Lad · 10-30-2003, 02:15 PM

So eight quaters of growth is just a bubble? LOL I knew you wouldnt let me down. Denial aint just a river in Egypt.

2wolves · 10-30-2003, 02:30 PM

Quote:

Originally posted by Food Eater Lad
So eight quaters of growth is just a bubble? LOL I knew you wouldnt let me down. Denial aint just a river in Egypt.

Certainly not at 7.4%.

But let's take a look at it from this perspective: fewer jobs, more capital going where? Not to the middle class which is the spine of Federal government revenue. The Blunder on Terror has to be paid for in some fashion.

2Wolves

Food Eater Lad · 10-30-2003, 02:45 PM

And the highering will start, you watch 2 Wolves, a rising economy means more work for everyone. Time to update that resume. And Blunder on terror? thats a good one, too bad most americans disagree with you, as much as you would like this nation to be soft on Terrorism issues.

james t kirk · 10-30-2003, 03:38 PM

Actually, congratulations are in order, those numbers are phenominally good.

7.2 is not sustainable, nor would you want it to be. It would eventually cause inflation, which would cause greenspan to raise interest rates to stem inflation. Give that person and US national debt is at all time record highs, any raise to the bank rate would have a rather severe impact to both those in debt and the country as a whole.

But still 7.2 percent is the highest single quater rate i can remember. Congratulations are in order.

But i would be happy with a nice robust 4% year after year. Now the job market needs to pick up a bit.

I am a bit perplexed as to why the stock market didn't roar with approval though. Very strange. What the fuck do they want?

2wolves · 10-30-2003, 04:34 PM

Quote:

Originally posted by Food Eater Lad
And the highering will start, you watch 2 Wolves, a rising economy means more work for everyone. Time to update that resume. And Blunder on terror? thats a good one, too bad most americans disagree with you, as much as you would like this nation to be soft on Terrorism issues.

Most Americans have never been in uniform or been shot at either. Your point is?

2Wolves

onetime2 · 10-30-2003, 04:54 PM

Quote:

Originally posted by james t kirk
Actually, congratulations are in order, those numbers are phenominally good.

7.2 is not sustainable, nor would you want it to be. It would eventually cause inflation, which would cause greenspan to raise interest rates to stem inflation. Give that person and US national debt is at all time record highs, any raise to the bank rate would have a rather severe impact to both those in debt and the country as a whole.

But still 7.2 percent is the highest single quater rate i can remember. Congratulations are in order.

But i would be happy with a nice robust 4% year after year. Now the job market needs to pick up a bit.

I am a bit perplexed as to why the stock market didn't roar with approval though. Very strange. What the fuck do they want?

James, thank you for an intelligent analysis of the facts. It's the few posts from people that "get it" that make up for all the other bs out there.

As for the stock market, it takes all unexpected news badly. Had it come in at the 6% rate that many had predicted it would have been off to the races. The extra has them scratching their heads and fearing a too fast economy and the Fed reaction to this growth.

Liquor Dealer · 10-31-2003, 05:48 AM

Maybe we should be greatful that the economy appears to be turning around - using what Wall St. does as a guage is no better than having an idiot do the math - Wall St. reacts to a fart and ignores hurricanes far too often. While Wall St. might reflect the views of the monied eccentrics it doesn't show a true picture of anything else. You might as well use the hot air that comes from a few of Hollywood's elite as a guage also- those idiots come as close to showing the truth about anything and everything as does the stock market - Half the time neither one of them even agrees with itself.

10-30-2003, 08:11 AM	#1 (permalink)
onetime2 Junkie Location: NJ	Damned slow economy. Only grew at a 7.2% rate in Q3! http://money.cnn.com/2003/10/30/news...ex.htm?cnn=yes GDP growth surges 7.2% Broadest measure of economic growth at strongest pace in 3Q since first quarter of 1984. October 30, 2003: 10:32 AM EST NEW YORK (CNN/Money) - U.S. economic growth surged in the third quarter of 2003 to the fastest pace in nearly two decades, the government said Thursday, in a report that was much stronger than most economists expected. Gross domestic product (GDP), the broadest measure of economic activity, grew at a 7.2 percent annual rate in the quarter after growing at a 3.3 percent rate in the second quarter, the Commerce Department reported. Economists, on average, expected GDP growth of 6 percent, according to Briefing.com. "This is obviously an extraordinarily strong report, led by the consumer, but also with good signs about the state of the business sector and business confidence," said Lehman Brothers economist Drew Matus. The burst of GDP growth was led by a 6.6 percent growth rate in consumer spending, the fastest pace since 1988. Consumer spending grew at a 3.8 percent pace in the second quarter. Child tax credit checks and lower rates of income tax withholding helped fuel the third-quarter spending surge, enabling the Bush administration -- which pushed for tax cuts earlier this year -- to take a victory lap Thursday morning. "Today's report on real GDP in the third quarter shows that the president's economic policies are having a positive impact on the economy," Treasury Secretary John Snow said. But U.S. stocks fell in early trading after the report, the strength of which was already expected by many traders. Treasury bond prices also fell, pushing interest rates higher, since bond yields and prices move in opposite directions. Still few jobs Many economists expect the impact of the tax cuts to fade in the fourth quarter, and the cash flow from mortgage refinancings, another boon to third-quarter economic growth, is expected to diminish as well. As a result, most economists expect a slower pace of GDP growth, about 4 percent, in the fourth quarter. A decline in business inventories in the third quarter, however, could mean GDP will get a boost in the fourth quarter, if and when businesses re-stock their shelves. "The plunge in inventory accumulation does suggest that firms are not confident enough to add merchandise to their shelves," said Anthony Chan, chief economist at Banc One Investment Advisors. "But they will not be able to do this indefinitely because everyone knows that sporting empty shelves in an rising growth environment is not prudent." In a separate report, the Labor Department said new weekly claims for unemployment benefits were still relatively high in the week ending Oct. 25, pointing to the Achilles' heel of the strengthening economy: a sluggish job market. In fact, during a quarter with the strongest growth rate since 1984, non-farm payrolls shed a total of 41,000 jobs, according to Labor Department statistics, in part because of strong productivity growth, which enables companies to get more work out of fewer workers. But job growth is typically a lagging economic indicator, and most economists hope that continued strong demand will eventually catch up with the recent gains in productivity and lead to sustained job growth. "Since no new jobs were generated in the third quarter, the growth story is entirely based on productivity," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "The good news for workers is that productivity growth cannot continue at this pace. Demand will translate into jobs very soon, and in fact I think it's happening right now." "But that's still largely a hope, not a certainty," Cheney added. Cars, homes lead the charge Much of the strength in consumer spending in the third quarter was in durable goods, items meant to last three years or more, and much of that strength was in sales of motor vehicles and parts, which alone contributed 1.17 percentage points to the total pace of GDP growth. Record home sales also contributed to GDP growth in the quarter; residential investment boomed to a 20.4 percent annual pace, compared with 6.6 percent in the second quarter. Residential investment contributed nearly a full percentage point to the total GDP growth rate. Nonresidential fixed investment rose at a 11.1-percent annual rate, following the second quarter's 7.3 percent pace, a sign of continuing strength in business spending. Investment in equipment and software rose at a 15.4 percent pace, compared with 8.3 percent in the second quarter. Spending on equipment and software contributed 1.18 percentage points to the total GDP growth rate. Weakness in imports -- which subtract from GDP, since they represent goods and services bought from other nations -- also helped total GDP growth. Imports grew at just a 0.1 percent pace in the quarter, while exports surged at a 9.3 percent growth rate. Government spending, which contributed mightily to the second quarter's growth rate, slowed down. Defense spending, which grew at a 45.8 percent pace in the second quarter, driven by spending on the war in Iraq, was flat in the third quarter. The personal consumption expenditure price deflator, an inflation measure closely watched by the Federal Reserve, rose to 1.7 percent from 1.0 percent in the second quarter. The Fed recently left its target for its key short-term interest rate unchanged at levels not seen consistently since 1958, saying the recent surge in economic growth had not changed its outlook for inflation. The Fed has maintained for several months that it is worried about inflation getting too low, which could hurt corporate profits and economic growth. "We believe that the Fed will require both consistent solid hiring and a rise in inflation before it begins to lift rates," said UBS Warburg chief economist Maury Harris. Would be nice if a few other sectors (unemployment for example) would pick up a bit more. But overall an impressive showing from the consumer. Last edited by onetime2; 10-30-2003 at 08:14 AM..

10-30-2003, 08:23 AM	#2 (permalink)
Liquor Dealer Super Agitator Location: Just SW of Nowhere!!! In the good old US of A	I'm sure that the only reason for this growth is a result of the many fine candidates vying for the Democratic nominations continued efforts to inform the American people of how bad things really are. If it goes up a few more points I am sure that many will tell you that this is most definitely grounds to start an immediate recall petition to get rid of the current administration before uncontrolled growth gets our econoimy into such a mess that they have absolutely nothing left to bitch about. __________________ Life isn't always a bowl of cherries, sometimes it's more like a jar of Jalapenos --- what you say or do today might burn your ass tomorrow!!!

10-30-2003, 08:28 AM	#3 (permalink)
Ustwo Pissing in the cornflakes	I'd give 2 weeks pay to know what the 9 dwarves REAL reaction to this news was. I knew the economy was getting better at least locally. Its been a shopping frenzy out here for the last few months. At the Oak Brook mall, one of the best malls in the US for quality stores, I had to park out in the outter rows of parking where you normally never have to park unless its almost Xmass. Stores like best buy and the like were total zoos as well. Obviously this is all anecdotal, but it is amusing in light of the new numbers. __________________ Agents of the enemies who hold office in our own government, who attempt to eliminate our "freedoms" and our "right to know" are posting among us, I fear.....on this very forum. - host Obama - Know a Man by the friends he keeps.

10-30-2003, 12:51 PM	#28 (permalink)
Ustwo Pissing in the cornflakes	Who wants to bet the tilted left would be saying how horrible Bush was had the figures been reversed This is basicly a 'haha' moment. __________________ Agents of the enemies who hold office in our own government, who attempt to eliminate our "freedoms" and our "right to know" are posting among us, I fear.....on this very forum. - host Obama - Know a Man by the friends he keeps. Last edited by Ustwo; 10-30-2003 at 01:33 PM..

10-30-2003, 01:57 PM	#32 (permalink)
jimk Addict Location: Chicago	as someone in the futures pits, i think a number that strong with no rally is quite bearish. people are getting worried that this mild bull run has been coaxed out of the market by every stimuli they could throw at it. bush's guys have thrown everything they had on the fire. time to see if the bull can stand on its own. __________________ raw power is a guaranteed o.d. raw power is a laughin' at you & me -iggy

10-30-2003, 08:50 AM	#5 (permalink)
2wolves Psycho Location: Just outside the D.C. belt	With tongue planted firmly in cheek...... since the economy of the Clinton era was the result of the Raygun/Bush the Elder's planning (according to some) then this coming boom (-cough-) has to be the work of Clinton. Correct? 2Wolves

10-30-2003, 09:03 AM	#6 (permalink)
Food Eater Lad Banned	Nope 2 wolves, since the last year of CLinton's tenure the econonmy declined. Clearly the ride from internet speculation was over. This rise can not be credited to Clinton.

10-30-2003, 09:37 AM	#8 (permalink)
eple Banned Location: norway	Jesus this is ridicolous. Conservatives and Democrats never stop arguing who's president rescued and who destroyed the economy, and noone can prove a thing. It is all word agains word. Could we just declare this a none-issue? Until someone is able to come up with undeniable proof, can't we all just call it a draw, and skip the entire political pissfight where noone wins? Just be glad that the economy is on the rise, don't try to spin it either way.

10-30-2003, 09:45 AM	#9 (permalink)
2wolves Psycho Location: Just outside the D.C. belt	So much for an attempt at light humor. (I could have sworn I put in the 'toungue in cheek' bit) And so it goes.... 2Wolves

10-30-2003, 09:52 AM	#12 (permalink)
eple Banned Location: norway	Man, I knew there was something dodgy about your sister's ex-husband, the way he used to flinch when we mentioned the economy sould have tipped me off...

10-30-2003, 09:56 AM	#13 (permalink)
Food Eater Lad Banned	Where is Harmless Rabbit to explain how this isnt really happening?

10-30-2003, 10:31 AM	#16 (permalink)
Food Eater Lad Banned	So what are the democrates going to do now that the ecomony is growing so fast? This must be the worst news they have heard since declaring their bid for presidency?

10-30-2003, 11:10 AM	#22 (permalink)
Food Eater Lad Banned	This is three quaters in a row the economy is rising, 2 wolves. Sorry to burst your bubble. I know you would prefer a soft America.

10-30-2003, 02:15 PM	#34 (permalink)
Food Eater Lad Banned	So eight quaters of growth is just a bubble? LOL I knew you wouldnt let me down. Denial aint just a river in Egypt.

10-30-2003, 02:45 PM	#36 (permalink)
Food Eater Lad Banned	And the highering will start, you watch 2 Wolves, a rising economy means more work for everyone. Time to update that resume. And Blunder on terror? thats a good one, too bad most americans disagree with you, as much as you would like this nation to be soft on Terrorism issues.

10-30-2003, 03:38 PM	#37 (permalink)
james t kirk Junkie Location: Toronto	Actually, congratulations are in order, those numbers are phenominally good. 7.2 is not sustainable, nor would you want it to be. It would eventually cause inflation, which would cause greenspan to raise interest rates to stem inflation. Give that person and US national debt is at all time record highs, any raise to the bank rate would have a rather severe impact to both those in debt and the country as a whole. But still 7.2 percent is the highest single quater rate i can remember. Congratulations are in order. But i would be happy with a nice robust 4% year after year. Now the job market needs to pick up a bit. I am a bit perplexed as to why the stock market didn't roar with approval though. Very strange. What the fuck do they want?

10-31-2003, 05:48 AM	#40 (permalink)
Liquor Dealer Super Agitator Location: Just SW of Nowhere!!! In the good old US of A	Maybe we should be greatful that the economy appears to be turning around - using what Wall St. does as a guage is no better than having an idiot do the math - Wall St. reacts to a fart and ignores hurricanes far too often. While Wall St. might reflect the views of the monied eccentrics it doesn't show a true picture of anything else. You might as well use the hot air that comes from a few of Hollywood's elite as a guage also- those idiots come as close to showing the truth about anything and everything as does the stock market - Half the time neither one of them even agrees with itself. __________________ Life isn't always a bowl of cherries, sometimes it's more like a jar of Jalapenos --- what you say or do today might burn your ass tomorrow!!!