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The Economy Booms

From here:

Strong consumer spending and business investment and a slightly lower than previously reported trade deficit meant the US economy grew at a 3.9 per cent rate in the third quarter, the Commerce Department said.

The upward revision from the 3.7 per cent advance estimate was above consensus expectations and represented a rebound from 3.3 per cent growth in the second quarter.

Core personal consumption expenditures inflation, excluding food and energy, the Federal Reserve’s preferred measure of inflation, was unchanged at a 0.7 per cent rate in the quarter – the lowest reading since the 1960s.

Hello? Did you get this? Strong growth, low inflation…why, it’s like the New, New Economy!

The report provided further support for the Fed’s case that the economy has picked up, after an earlier soft patch, and that with inflation under control it will be able to raise rates at a “measured” pace. Investors see another quarter point increase to 2.25 per cent as likely when the Fed meets later this month.

[...] [C]onsumer spending rose at a 5.1 per cent in the third quarter, the Commerce Department said, stronger than its advance estimate and well above the 1.6 per cent rate recorded in the second quarter.

Business investment was revised up and equipment investment rose at a strong 17.2 per cent rate.

The US trade deficit in the quarter was revised down from $598bn to $588bn.

[...]

Inventory accumulation slowed more than previously reported, a drag on growth in the quarter but a good sign for growth in the coming months.

Kathleen Stephansen, economist at Credit Suisse First Boston in New York, said the revisions pointed to more balanced growth – with consumer spending and business investment up, and improved trade position and lower inventories. “It is not a dramatic change but a better balance of growth and lower inventories bodes well for the fourth quarter,” she said.

Corporate profits from current production rose 8.4 per cent from a year ago, but dropped 2.4 per cent from the second quarter. Economists said the quarterly decline largely reflected insurance claims related to hurricane damage, but that the trend was still one of moderating profits after strong profit growth last year.

From here:

U.S. job growth soared in October, blowing away even the most optimistic forecasts on Wall Street [...]

Employers added 337,000 jobs to their payrolls last month, up from a revised 139,000 in September, the Labor Department reported. Economists surveyed by Briefing.com were looking for a gain of 175,000.

[...]

The jump in payrolls was the best gain since a gain of 353,000 new jobs in March kicked off three months of strong hiring.

[...]

Some economists believe that some of October’s gain came as the government finally got a more accurate picture of the impact that three major hurricanes had in September.

“I think this report clearly shows that we got a hurricane bounce back,” said Anthony Chan, senior economist for J.P. Morgan Fleming Asset Management. “It also puts the possibility of a Fed rate hike in December back in play.”

While economists and investors have agreed the Fed will probably raise rates another quarter percentage point at its Nov. 10 meeting, many expected the central bank to pause, and hold rates steady, at its December policy meeting.

After Friday’s strong jobs number, that is far less certain.

In other words, things are swell, TYVM.

The next four years are going to be boom times, much like during Reagan’s second term. Reagan also had a nasty recession during his first term, but won re-election anyway, and the economy did wonderful things during his second term.

I fully expect the same result from Bush’s second term.

About RJ

  • http://theugliestamerican.blogspot.com/ andy marsh

    This can’t possibly be true RJ. Everything I read around here tells me that the economy is doing the spiral plunge! Hell is freezing over! The sky is falling!!!
    It just can’t be true!

  • http://www.appraisercitywide.com Michael Walsh

    I hope its true, however, as interest rates continue to rise, oil prices at record levels, the dollar gets weaker, and ths war keeps on going, I have my doubts.

  • http://www.filteringcraig.com Craig Lyndall

    As per usual… it is right in the middle of RJ and Hal. Hal has points about people in this country who are in need of help financially. RJ has points about the overall economy recovering.

    Bottom line is that things are better than they were before 9/11 as far as the economy goes, but there is a lot of work to be done in terms of our place in the world economy and placing our people in the various labor markets of this country.

  • http://www.resonation.ca Jim Carruthers

    woohoo, a 0.6 per cent difference between a guess and a figure without any explanation of metrics or baselines. As usual, RJ provides us with the good news about the chocolate ration. Double-plus good as usual.

  • http://www.bigtimepatriot.com Big Time Patriot

    First question, which liberals are you quoting as talking about the economy and what exactly are they saying about it? Otherwise that is a pretty general statement, like I can say “Conservatives are hate filled people who fear they will become gay if exposed to gay people”, a true fact, but hard to debate in the generality.

    But about the true state of the economy…here is the question… Are the economic indicators used by newspapers and government reports an accurate reflection of the day to day economy as experienced by American citizens?

    Look around yourself, in your local circle are there as many people employed as there were 8 years ago? Are a majority of people you know making MORE money than they were 2 years ago? Do YOU expect to make more money this year than last?

    It’s nice when we have a month where job gains keep pace with the growth in population, that is not quite the same as catching up with job losses under 4 years of “spend and borrow” bushonomics.

    Perhaps, just consider this, the increase in corporate profits may NOT be what people are thinking of when they realize their incomes and job prospects do not show any signs of rosy increases under an administration which is all out against such things. An administration which is all about rewarding crony capitalism and inherited wealth and is floating the idea of a REGRESSIVE tax (a national sales tax) instead of even a FLAT income tax (why shouldn’t the poor pay a HIGHER percentage of taxes than the rich?) does not make ME think there is much help coming for the working people of America.

    You can read your financial reports as produced by people inside the financial field as directed by CEO’s whose salaries increased well above inflation during the period where stock prices dropped 20%. These people sure know all about “reality”. I will keep an eye out on the increasing number of people hanging outside the local building supplies superstore hoping to pick up some work as casual labor.

    Perhaps you should read your local newspaper and see if you can spot the number of new businesses and the number of places having layoffs and outsourcing. Let us know how the economy looks if you aren’t getting your reports from the financial industry or administration reports.

  • http://theugliestamerican.blogspot.com andy marsh

    BTP – By your reasoning, as you say, under 4 years of bushonomics, that would mean that everything was rosy until the day Bush took office. The VERY FIRST DAY the economy started to tank! That’s just amazing to me that one man, who’s not even the chairman of the fed, can have that much impact on the largest economy in the world all by himself! and of course, those 2 small buildings down the street from WALL STREET coming to the ground had nothing to do with what happened to the economy…and the dotcom bubble…nothing…it’s all bush’s fault! of course it is! HOLY MACKERAL!!!

  • http://www.foliage.com/~marks Mark Saleski

    of course the economy was already in decline with pres. bush took office.

    and of course, 9/11 had an enormous (negative) impact on the economy as well.

    but…between 9/11 and the ‘planning months’ leading up to the war with iraq, there was much uncertainly in the business world…which lead to further negatives on the economy.

    that WAS bush’s fault.

  • http://www.resonation.ca Jim Carruthers

    What I most appreciate about blogcritics.org is how it is able to channel transmissions from Bizarro Earth. It seems to be the party line by certain cadres to just say “things am great, real good am is” as often as possible without any proof. Which is standard operating procedure in most banana republics. But with this iteration, they’ve actually gotten rid of the criteria of actually growing bananas.

  • http://www.smallbusinesses.blogspot.com Anita Campbell

    RJ, I agree with you that the economy is strong. We are richer than at any time in history.

    Remember our omnipresent media, however, constantly blaring out bad news at every turn.

    I’m convinced that no matter how good things are, many citizens will always have some overriding sense that everything is bad, because of the way conditions are presented.

    But let’s not dump all blame on the media, because we are all to blame. The media has conditioned us to listen only when news is presented as bad, and we have allowed ourselves to succumb to the “bad news” drug. We simply don’t even pay attention anymore unless something is presented as sensational. And that’s our own fault.

  • http://www.bhwblog.com bhw

    Anita, that article shows a lot of statistics about what people “own,” but not what they earn. In other words, do the poor really own all those big screen TVs, or did they charge them? Why is there no discussion of consumer debt, which is at an all-time high, in that article?

    So as our society purchases more, we borrow money at high interest rates to do it. That’s not a good economic trend or a sign of strength.

    My favorite part of the article is where the items owned by households in 1970 are compared with today because it compares mostly items that DID NOT EXIST in 1970, or were extremely rare, such as:

    Cell Phone
    Large-screen TV
    Answering Machine
    Cable or Satellite TV hookup
    VCR
    Microwave Oven

    There’s also no mention of the increase in personal bankruptcy filings.

    Lots of omissions.

  • http://www.resonation.ca Jim Carruthers

    No, you don’t understand bhw, I found $10 on the street today, which is a 100 per cent increase over the money I found yesterday. And given that past performance is no indication of future results (well, I didn’t find $10 the day before yesterday, did I mr. smartypants, so there!), I can expect to find $10 tomorrow, and if I find $10 everyday except Sunday (when I pray to Mammon), and then invest in lottery tickets – I’ll be rich. Things have never been better!

    Plus, they (not the media, just “they”) announced the chocolate ration has increased to a level which exceeds what is allowed by law.

  • http://www.bhwblog.com bhw

    If the economy “boomed” in October, what did it do in November?

    Job growth slowed significantly in November, according to a government report Friday that came in far weaker than Wall Street forecasts and cut the strong number reported in the previous month.

    The Labor Department report showed a net gain of 112,000 jobs in November, down from the revised 303,000 the previous month. Economists surveyed by Briefing.com had forecast an increase of 200,000 jobs to non-farm payrolls in the November period.

    [snip]

    October had originally been posted as a 337,000 job gain, well above forecasts at the time, while September was revised to a 119,000 job gain, down from earlier reading of 139,000.

    “After a brief reprieve, the specter of a winter jobs drought looms large and frightening,” said University of Maryland professor Peter Morici.

    The report also showed a slight decline in the average work week in the private sector, down to 33.7 hours from 33.8 in October, and average hourly wages crept up only 1 cent to $15.83, the narrowest increase posted so far this year.

  • http://admantsun.blogspot.com Steve S

    Whenever news like this comes out, I always tend to personalize it. How does it affect me and my family, etc.

    Someone could tell me that the economy is doing greater than ever and come up with numbers to prove it, but what I will ‘vote’ on, is the fact that my company has had to downsize 75% in the last 5 years, I haven’t had a raise in over 5 years, neither has my partner, friends are getting their hours cut, etc.

    I saw a report in mid-November, but didn’t save the link, I wish I did. With a few exceptions, I think NY was one, the economy is doing better in red states, at the usual expense of the blue states. I wish I had the link to back that up, but it’s out there somewhere if someone’s interested in tracking it down.

  • http://www.netaloid.com loid

    Taking an economic snapshot on a given month does not a recovery make, as bhw notes by showing revisions to economic data. A skilled propagandist can pick and choose among the myriad of economic data available and come up with the results of his or her choosing.

    If you look at the economic condition now as opposed to December of 2001, I think it’s fair to say that it has improved somewhat on many planes. However, employment still is down since pre-9/11 and is not keeping pace with population increases, and the stock market has only now approached the levels it had reached before plunging three years ago.

    All of that is beside the point, however, because it’s inevitable that the current administration’s inability to exercise basic conservative financial restraint will result in serious fiscal problems for all segments of the economy. With luck, the chickens may not come home to roost until after Bush leaves office. But they will come home. This Copley News Service story pretty well sets the scenario:

    In November, the dollar fell to an all-time low against the European Union’s euro and to four-year lows against the Japanese yen and Korean won. Since early 2002, the dollar has dropped 20 percent against a basket of six major currencies. Most economists predict it will drop at least 10 to 15 percent lower before it bottoms out, although some say it could fall as much as 40 percent.

    Some U.S. companies are cheering the decline, saying it could make their goods seem cheaper in foreign markets, which theoretically would help boost exports.

    But economists say that, for the average consumer, the decline could mean lower values for their investments, higher prices on imported goods and greater costs for foreign travel. And some warn about worst-case scenarios, in which a sharp decline in the dollar leads to an equally sharp spike in inflation, which would boost interest rates and erode home values.

    “Foreign investors are going to start saying that, if the value of the dollar is so low, they have to be compensated by having higher interest rates on their investments here,” said Keitaro Matsuda, economist for Union Bank in San Francisco. “As the long-term interest rate rises, it will knock the air out of the housing market. And if people start to lose the equity in their homes, you can’t imagine the devastating impact it might have.”

    Some economists say the decline in the dollar is eerily similar to a decline in the 1970s that touched off the worst period of growth the United States experienced since World War II. Both then and now, the dollar’s decline began during a time of high budget and trade deficits, low interest rates, high oil prices and ever-increasing military spending. By the end of the 1970s, the nation was suffering double-digit rates in inflation, mortgages and unemployment.

    Deficits started problems

    The decline of the dollar began three years ago, driven by the growing U.S. trade and budget deficits and fueled by the easy money created by the nation’s historically low interest rates. The budget deficit, which hit a record $412.28 billion in September, has made the United States increasingly dependent on loans from foreign countries, led by Japan and China. The United States’ inability to restrain its debt has sparked jitters among foreign governments and investors, contributing to the decline in the dollar.

    “Foreigners are skeptical about the ability of the U.S. to handle its borrowings,” said Gordon Hanson, economist at the University of California, San Diego. “We’ve long had a heavy fiscal policy of borrowing — not just the federal government but households as well have taken on a lot of debt. The rest of the world has allowed us to enjoy a good lifestyle. But, at some point, we have to pay for it.”

    If it’s important to you to find blame, then it’s pretty hard not to blame the twin deficits on Bush’s stubborn and continuing push for big tax cuts with no thought for what happens to the other side of the balance sheets, added by spiraling spending for his Iraq invasion – which is destined to continue for years. Add to that an institutionalized isolationism that has extended to the world trade arena and bore fruit in the form of record trade deficits and a dollar that more resembles Mexico’s peso.

    So no matter how rosily you paint the current economy, it amounts to putting a pretty mask on a monster.

  • Eric Olsen

    what is rarely discussed in objective terms because that it is basically an oxymoron, but so much of the performance of the economy is pyschological – 2/3 of it is consumer spending – and much of consumer behavior is based upon perception and trust in the future. As a result, in many ways it’s a self-fulfilling prophesy. It is no less legitimate to emphasize the positive than the negative, and in objective terms, actually more “helpful.” The perspective one takes seemly oddly related to how one feels about those in power.