Growing Economy

Discussion in 'Current Events' started by MtnBiker, Oct 30, 2003.

  1. MtnBiker
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    MtnBiker Senior Member

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    Economy Grows at Fastest Pace Since 1984

    October 30, 2003 08:54 AM EST


    WASHINGTON - The economy grew at a scorching 7.2 percent annual rate in the third quarter in the strongest pace in nearly two decades. Consumers spent with abandon and businesses ramped up investment, compelling new evidence of an economic resurgence.

    The increase in gross domestic product, the broadest measure of the economy's performance, in the July-September quarter was more than double the 3.3 percent rate registered in the second quarter, the Commerce Department reported Thursday.

    The 7.2 percent pace marked the best showing since the first quarter of 1984. It exceeded analysts' forecasts for a 6 percent growth rate for third-quarter GDP, which measures the value of all goods and services produced within the United States.

    The economy's recovery from the 2001 recession has resembled the side of a jagged cliff; a quarter of strength often has been followed by a quarter of weakness. But analysts are saying that pattern could be broken, considering increasing signs the economy finally has shaken its lethargy and is perking up.

    Near rock-bottom short-term interest rates, along with President Bush's third round of tax cuts, have helped the economy shift into a higher gear during the summer, economists say. The next challenge is making sure the rebound is self-sustaining, they say.

    Democrats, however, argue that the tax cuts contributed to a record budget deficit in the recently ended 2003 fiscal year and have done little to spur significant job growth.

    Although the nation's payrolls grew by 57,000 in September - the first increase in eight months - the economy needs to add a lot more jobs than that each month to drive down the 6.1 percent unemployment rate, analysts have said.

    The administration has argued that as economic growth improves, meaningful job creation will follow. Bush will be counting on that as he heads into the 2004 presidential election season.

    In other encouraging economic news from the Labor Department, new claims for unemployment benefits last week dropped by 5,000 to 386,000, a sign that layoffs are slowing. U.S. workers' wages and benefits went up by 1 percent in the third quarter, up slightly from a 0.9 percent increase in the previous quarter.

    Amid signs that the recovery is regaining traction, the Federal Reserve on Tuesday decided to hold a key short-term interest rate at a 45-year low of 1 percent. Super-low short-term rates may give consumers and businesses an incentive to spend and invest more, boosting economic growth.

    Economists believe the economy will grow at a slower - but still healthy - 4 percent rate in the final quarter.

    In the third quarter, consumers ratcheted up their spending at a brisk 6.6 percent annual rate. That was the biggest increase since the first quarter of 1988 and was up from a 3.8 percent pace in the second quarter.

    Consumers in the third quarter spent lavishly on big-ticket items, such as cars, boosting such spending by a whopping 26.9 percent rate. And, they also spent briskly on "nondurables" such as food and clothes, which grew at a 7.9 percent pace, the strongest showing since the first quarter of 1976.

    While consumers have been the main force keeping the economy going, there are more signs that businesses are starting to do their part.

    Especially encouraging was the 15.4 percent growth rate in spending by businesses on equipment and software in the third quarter. That marked the largest increase since the first quarter of 2000 and was up from a 8.3 percent growth rate in the second quarter.

    Sustained turnarounds in capital spending and in hiring are crucial to the economy's return to full throttle. Economists said business wants profits to improve and wants to be sure of the recovery's vigor before it goes on a spending and hiring spree.

    The red-hot housing market, powered by low mortgage rates, also contributed to the strong showing on third quarter GDP. Investment on residential projects grew at a 20.4 percent rate, the biggest increase since the second quarter of 1996, and more than three times the 6.6 percent growth rate seen in the second quarter.

    Federal government spending, which grew at a 1.4 percent rate, was only a minor contributor to GDP in the third quarter. Spending on national defense was flat. But in the second quarter, military spending on the Iraq war - which grew at a whopping 45.8 percent rate - helped to catapult economic growth.

    A better trade picture in the third quarter also contributed to GDP growth.

    But inventory reduction by businesses continued to be a drag on the economy and reduced third-quarter GDP by 0.67 percentage point. And a continuing reluctance by businesses to build up stocks suggest that executives remain wary of the rebound's staying power.




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    http://www.start.earthlink.net/newsarticle?cat=1&aid=D7UGHGD02_story
     
  2. MtnBiker
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    MtnBiker Senior Member

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    Oct. Factory Growth Fastest Since 2000
    Mon Nov 3,11:19 AM ET Add Business - Reuters to My Yahoo!


    By Eric Burroughs

    NEW YORK (Reuters) - U.S. manufacturers cranked up output in October to its highest level in nearly four years and slowed the pace of layoffs, according to a report on Monday showing the strongest rebound among factories since the 2001 recession.

    The Institute for Supply Management said its October purchasing managers' index jumped to 57.0 -- the highest since January 2000 -- from 53.7 in September, beatings forecasts for a rise to 56.0. Any reading above 50 in the index points to growth in the sector, which makes up less than a fifth of the overall economy.


    The report was the latest underscoring the economy's rapid acceleration in the past few months as tax cuts and better business confidence fueled third-quarter growth that was the fastest in two decades.


    While that growth rate is expected to slow, most economists expect continued solid growth to spur hiring. The employment index showed the pace of layoffs slowing, rising to 47.7 from 45.7. That was the highest level for the employment index since December last year.


    "Employment is in the process of turning," said Jade Zelnik, chief economist at RBS Greenwich Capital.


    Factories have suffered the most in the recession and stumbling recovery, losing more than 2.5 million jobs. Those layoffs have made manufacturers' complaints blaming China's currency policy for worsening their problems a hot political issue heading into next year's U.S. presidential election.


    It was the fourth straight month of expansion for manufacturing, and usually factory job gains come at this point in an expansion. But Norbert Ore, head of the ISM manufacturing business survey committee, said: "This is not a typical recovery by any means."


    Stocks added to early gains on the back of the factory data, with the Standard & Poor's 500 index (^SPX - news) up nearly 1 percent. U.S. Treasuries extended their early losses.


    A breakdown of the survey's components revealed that the hearty manufacturing expansion was likely to persist. New orders, the key source of future activity, rose to its highest level in more than four years at 64.3 in October compared with 60.4 the prior month.



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    It is becoming increasingly difficult for the 9 Democratic canidates to talk about a bad economy, yes much is to be done and jobs need to recover. Indicators are pointing the right direction.:)
     
  3. Pinko
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    Pinko Guest

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    You can show me as many articles as you like about the economy recovering, but the reality is that we have lost 3 million jobs since Dubya took office!
     
  4. eric
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    eric Guest

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    I should have posted in this thread to begin with.

    I'm tired of reading posts about the 6.1 percent of the labor force that doesn't have a job.

    It's tough being downsized, being told you're redundant to an organization, being forced to accept a menial or low-paying job just to put food on the table, or being asked to work at something that doesn't utilize your level of education and training.

    When it comes to the economy at large, however, all the attention on the 6.1 percent of the working population that's unemployed ignores the 94 percent who are working and doing well. Productivity growth is high, inflation is low, and real incomes, aided by tax cuts, are rising.

    The political motivation for focusing on the unemployed is obvious. Voters hold the incumbent president responsible for the state of the economy when they go to the polls every four years. An improving economy takes away a major election-year issue from Democrats hoping to make Bush a one-term president. If the economy is growing solidly, which most economists predict will continue at a rate of about 4 percent, the only thing left to complain about is the lack of job growth.

    Lets us take a look at unemployment in more detail; people not familiar with economics take the 6.1 percent unemployment rate at face value, but this number can be quite deceiving. No economy in the world has or can sustain a 100 percent employment rate, so a realistic marker needs to be set to put unemployment in proper perspective. Economists like to use the term full employment, which the Federal Reserve officials haven't put a number on, but most economists suspect it's in the neighborhood of 5 percent.

    Now in almost every economy there's some frictional unemployment, the joblessness that results from people looking for a new job, changing jobs or relocating.
    Throw in a couple of percentage points for frictional unemployment, and the U.S. economy isn't far away from full employment.

    What would it take to bring the unemployment rate down by a full percentage point to 5 percent? Assuming labor force growth of 1 percent, it takes employment growth of 150,000 per month just to absorb the new entrants into the labor force and keep the unemployment rate steady. It would take job growth of 1 percent in excess of that to lower the unemployment rate from 6 percent to 5 percent.

    To accomplish that in a year means job growth of 250,000 to 300,000 a month. It sounds like a lot now, given that the economy just added jobs, a measly 57,000, in September for the first time since January. But if the gap between soaring demand and modest output is to be narrowed, businesses are going to have to step up production and start hiring.

    “The gap between the growth in final sales and inventories is one of the largest in history,'' says Joe Carson, chief of global economic research at Alliance Capital Management. “That tells us the U.S. is just embarking on a long and powerful growth cycle.''
    To focus on the number of unemployed, about 9 million in September, assumes the expansion is doomed unless they find jobs. The 137 million who are working are doing pretty well.
    Average hourly earnings adjusted for inflation rose faster through the 2001 recession than during previous recessions, and some expansions. Real year-over-year earnings increased an average of 1.1 percent in the last three years compared with a 0.5 percent decline in the mid-1980s to mid- 1990s period. I can tell you that my company has been able to easily provide increases in salary greater than the increase in the CPI, which excluding food and energy, rose 1.2 percent in the year ended September, the smallest rise since the mid-1960s.

    Now, recently all the focus has been on inflation, or the lack of it. The Fed has said for months that the risk, while small, of an unwelcome substantial fall in inflation exceeds that of a pick-up, and all this talk may be overshadowing the reality of low unemployment.

    Two economic indicators are unusually low for this stage of the economic cycle, core CPI and unemployment, and once everyone stops worrying about deflation, the relatively tight labor market will push the Fed to move fairly aggressively. I think we could see the transition from disinflation to inflation rather abruptly.

    You know people, be careful what you wish for, because today the focus is on how many folks aren't working. Tomorrow it could be how many are.
     
  5. MtnBiker
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    MtnBiker Senior Member

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    Services sector expands, factory orders rise
    From wire reports
    WASHINGTON — The services sector increased its pace of expansion in October, surprising economists who expected a slowdown. And a second report showed orders for manufactured goods rose slightly in September, reflecting a pickup in business capital spending.

    In the first report, the Institute for Supply Management's non-manufacturing index rose to 64.7 last month, from 63.3 in September, just shy of August's record 65.1.

    A reading over 50 suggests growth in the services sector, which includes businesses from travel agencies to restaurants and accountants. That sector makes up roughly 80% of the U.S. economy.

    Services have held up better than the hard-hit factory sector the past three years. But a separate ISM report on Monday showed the fastest pace of growth in manufacturing in nearly four years indicating factories may be catching up.

    The employment index in ISM's services survey rose to 52.9, highest since November 2000 and up from 49.1 in September. The outlook for growth showed solid improvement, with the new orders index rising to 64.4 versus 59.9 in September, but still below August's rapid pace of 67.6.

    In Wednesday's second economic report, the Commerce Department said factory orders rose 0.5% in September despite a sharp drop in defense orders.

    That marked a turnaround from the 0.3% dip reported for August, according to revised figures released Wednesday. That August decline turned out to be not as deep as the 0.8% drop the government previously reported.

    Orders for long-lasting durable goods climbed 1.1% and demand for shorter-lived non-durables fell 0.2%.

    The September report came in close to expectations on Wall Street, where economists had looked for overall orders to gain 0.6%.

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    Hey Eric, is it possible that jobs will need to be filled to support these economic sectors?
     
  6. Amras
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    Amras Guest

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    :clap: :clap:

    Before I heard this, I was convinced that developed economies with a very high GDP per capita would never restart to grow that fast.
    In Germany, the population would start to party if they got near 2.5%

    Congratulations.
     
  7. rtm
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    rtm Guest

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    good news for CEOS, but I don't get how this helps little timmy buy Pepsi if his dad doesn't have a job forcing them to live in a van down by the river?
    :confused:
     
  8. janeeng
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    janeeng Guest

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    I don't think people have to live in their cars, I think that's more of a choice! having kids, your willing to do anything to feed them and put a roof over their heads, even if it's a hotel, time being - you can pump gas, food store's, shovel shit if needed, but don't tell me that there are absolutely no jobs at all out there, that bogus. Sounds to me more like someone that would rather hit the welfare stand and collect a check than take a job that may not be good enough. Your right poor little timmy needs to kick his Dad's ass for allowing him to sleep in a van, rather than go out and find a JOB!
     
  9. eric
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    eric Guest

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    First of all reread my post above about employment, if you can comprehend it.

    Little timmy's father needs to get off his lazy ass and get a job!
     
  10. eric
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    eric Guest

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    Janeen, I did not see your post.

    All I can say is "You go girl"!
     

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