Pre-Depression Indicators Forecasted Rosy Economy

The Wall Street Journal ^ | Wednesday, August 6, 2003 | CYNTHIA CROSSEN

[txhurl]

Still waiting for the job recovery. When the employment ads pages get fatter - consistently - the recovery is on.

[harpseal]

Everything is not rosy, especially unemployment, but the numbers are looking up in almost every other regard, in fact, it is projected that the increase in GDP will be around 6.5%.

Let us hope that is a good projection. However, the key for GWB and the mid and longer term health of the economy is the employment and employment most especially in good paying jobs.

Company profits are up, durable goods are up, stock market up, tax rebates are in the mail, consumer confidence up, home sales up, consumer and business spending up, etc... Businesses, which cut spending on equipment and software in the first three months of this year, boosted such investment in the second quarter at a sizable 7.5 percent rate.

A significant question is how much of this investment is in the uSA and directly affecting the American economy.

That marked the biggest increase in three years. And, after six straight quarters of slashing spending on new plants, office buildings and other structures, businesses boosted this spending by 4.8 percent in the second quarter. The US service sector surprised experts with a fourth consecutive month of growth in July that helped fan hopes of a recovery, according to Institute for Supply Management. Demand for U.S. manufactured goods rose at the sharpest rate in three months in June as a solid rise in orders for long-lasting items joined with a small gain in demand for other goods, the government said Monday. Indeed, the survey shows that the percentage of CEOs saying they're worse off now than they were 6 months ago has dropped from 51% to 26%. Americans applied for mortgages to buy homes in near-record numbers the first week in August. Applications for mortgages to buy homes rose 6.9 percent in the week ended Aug. 1 to their second highest level on record.

Results had best be forthcoming soon or GWB will not be happy a year from November. When Herbert Hoover ran on the campaign slogan of "Prosperity is just arround the corner the result was 20 years of Democrat occupation of the White House.

[BushCountry]

Unemployment typically lags the rest of the economy, since employers usually wait until a recovery is guaranteed before they hire new workers.  Everything I stated above combined, will create millions upon millions of jobs like the last recovery. There are hundreds of cities in the United States with unemployment under 4.0 % (considered by many to be full employment). You take the poorly managed California out of the national equation and the recovery looks 10 times better.   California has 10 of the top 25 cities with the highest unemployment.

As an example, Florida gained over 100,000 new non-farm jobs over last year's total for the past several months.  Jobs are going to come back.  These figures are actually a little old, most of these figures are improving!  When the GDP grows at 6.5% as expected next year, unemployment will be at effectively zero.

Lowest Unemployment
Metropoliatan Area	Unemployment Rate
Bryan-College Station, Texas	1.7
Columbia, Mo.	1.8
Fargo, N.D/Moorhead Minn.	2.0
Charlottesville, Va.	2.1
Gainesville, Fla.	2.2
Fayetteville-Springdale-Rogers, Ark.	2.3
Madison, Wis.	2.4
Sioux Falls, S.D.	2.4
Lubbock, Texas	2.6
Portland, Maine	2.6
Santa Fe, N.M.	2.6
Athens, Ga.	2.7
Bloomington-Normal, Ill.	2.7
Grand Forks, N.D.	2.8
Iowa, City, Iowa	2.8
Knoxville, Tenn.	2.8
Rapid City, S.D.	2.8
Stamford-Norwalk, Conn.	2.8
Bloomington, Ind.	2.9
Champaign-Urbana, Ill.	2.9
Danbury, Conn.	2.9
Enid, Okla.	2.9
Lincoln, Neb.	2.9
Bismarck, N.D.	3.0
Fort Walton Beach, Fla.	3.0
Sarasota, Fla.	3.1

[harpseal]

This is the ultimate nonsense, the underlying assumption of which is that the economy CAN be predicted in the first place. More to the point, what did economic statistics of the past in 1929 have to do with predicting the self-destruction that was soon to be visited upon the nation by the Smoot-Hawley tariff hikes and the tax hikes enacted to "balance the budget". The economy would probably have functioned well if the government had not committed economic hara-kiri.

You really really should learn some economic history before you start commenting on it. Saying the Smoot-Hawley tariff makes about as much sense as saying the Doolittle raid on Tokyo caused the japanses to attack Pearl Harbor. The Smoot-Hawley tariff was not enacted until 1930.

While you are at it study the the Fordney-McCumber Tariff Act of 1922 in which customs levels were increased to the highest levels in US history instead act as part of the greatest boom of prosperity the nation had ever seen, the Roaring Twenties.

Beyond this you amy wish to study the policies of the policies of the Federal Reserve and Benjamin Strong, head of the New York Reserve Bank. Few western and southern banks had elected to become members of the Fed, so Strong enacted a plan to force them. The plan was to lure the farmers and tycoons of the west and south into easy credit loans, and then call them in en masse to cause a recession and the failure of the non-Fed banks. This contraction of credit was the first of several too many straws for the economy.

Some other facts include the fact that the Depression of the 1930's should also be called the Depression of the 1920's becuase outside the USA it was going strong before the 1930's and ended in the early thirties in some nations.

[txhurl]

Hey, I'm all for that second-half recovery, any year now.

Consumer spending, comprising 66% of GDP, will drag us out of this mess as soon as the job market comes back. I'm anticipating as much: just wish it'd hurry up a little quicker.

[harpseal]

Unemployment typically lags the rest of the economy, since employers usually wait until a recovery is guaranteed before they hire new workers. Everything I stated above combined, will create millions upon millions of jobs like the last recovery.

As has been pointed out before several tiomes the lagging indicator line is only good for the first month or two of a recovery and employment is not a lagging indicator nor are new claims for unemployment. Now quit prior to this you admitted not everything was rosy. Many on this thread see some potential problems that are structural. They say that GWB should get ahead of these problems for his re-election

What specifically do you have a problem with in these areas. Now the US Dept. of labor has reprted a drop in employment for evcery month this year. This is a problem. It needs to be addressed.

[tm22721]

No depression, just high inflation due to the Fed being forced to monetize the gargantuan debt by selling bonds.

BUMP

[Suedo]

Good day BushCountry!

Yes, the economy appears to be improving (ever so slowly) given some of the recent data, although some data is still mixed at best. That said, I have seen zero, nada, zilch projections of increases in "GDP will be around 6.5%".....even Fed chairman Greenspan is looking for Q3 and Q4 of up to 4.5% (which I think is very optimistic).

Nonetheless, most of the projections I have seen are in the 3-3.5% GDP growth in Q3 and Q4, FWIW.

Enjoy!

[txhurl]

Which... coupled with high unemployment is termed 'stagflation'..? Isn't that what we had in the 80's?
(I was still stuffing crayolas up my nose at the time.)

[harpseal]

Still waiting for the job recovery. When the employment ads pages get fatter - consistently - the recovery is on.

Unless and until GWB does something about the structural problemns in our economy I would not suggest holding one's breath waiting.

[harpseal]

Actually, reading the article implies that a depression is around the corner and according to the responses the author has a following.

At least the author has the sense to not make a firm prediction. Now I have no crystal ball and I suggest no one has one that works consistently. therefor anyone who makes predictions is asking to have those predictions thrown in his/her face when events prove them wrong as they often do. Now in Chemistry and physics one may reasonably make predictions. If one contains for example 100ml of C8H18 and 2L of O2 in an enclosed space at 20degrees C and standard pressure and introduces a spark at 950 degrees C then the result will be an incendiary event that will release energy. such predictions can not be made in economics.

Now if you want GWB re-elected the way to do that is to address issues not pretend they are not issues. GWB needs to address issues not merely wait for them to go away if things go his way.

[El Gato]

Solar dust collected by the sun is the major contributing factor.

Actually not. It's galactic dust, and the extra accumulation is due to changes in the Sun's magnetic field. However those changes are on a 21 year cycle, with longer cycles affecting the peak levels of the 21 year cycles. It's hard to imagine something that happens every 21 years being the "cause" of ice ages which occur on much longer time scales. Now the longer term solar variability is quite likely the cause of at least some ice ages. The so called "Little Ice Age" began in the 1200 or 1300s and lasted into the 1800s. (New York harbor routinely froze over) The recent "global warming" trend is probably the flip side of the cycle, but seems to have reached it's peak, or nearly so. The LIA was preceded by the Medievil Warm Period, a time similar to that between the end of the LIA and today.

Of course it's not a simple as the sun giving off more power or less, but rather the way that change in the solar radiation interacts with the earth. Rain patterns change, ocean currents shift and so forth.

[AdamSelene235]

depression extremely likely! ROTFLMAO, you guys actually believe this?

The GSEs are ticking bombs.

The banks are ticking bombs.

The dollar is a ticking bomb.

Republicans are pushing Socialism and Keynesian economics like there's no tommorrow. Bush has made the greatest expasion of the welfare state since LBJ.

America has open ended military commitments in the middle east that contrary to the propaganda will not pay for itself. I doubt Iraq will reach Saddam levels of oil production for years. Americans will be paying Middle Eastern welfare for the rest of the decade. Bush saw fit to add Africa to our welfare rolls as well.

The price of oil is soaring.

War with N. Korea is a distinct possibility.

China making a run for Tawain is also quite possible.

The collapse of the House of Saud is quite possible.

So, yes, I'm still a wee bit bearish.

[Centurion2000]

bump

[B.Bumbleberry]

This is a debate that has been ongoing for decades, and you and I are not going to resolve it here. If you are not one of those who believe that domestic tax and tariff (taxes on foreign trade) increases are bad for an economy, I'm not going to change your mind.

I don't mind having a sensible debate, but I see no reason for the personal attack. You don't have any idea of what my grasp of history is. The tariffs were enacted in June 1930 but were working through Congress in late 29. The House Ways and Means announcement in early December that it was considering tariffs on "all" commodities, and Hoover's announcement that he would not include an anticipated cut in taxes in his proposed budget coincided almost pefectly with the collapse in the stock market. So what's historically inconsistent with the possibility that these events and the depression that began in 1930 might be related? And if you would you please list for me the nations whose depression "ended" in 1930, it would be helpful.

I don't disagree with you that the Federal Reserve played a role in the disaster. It hiked interest rates when it should have been slashing them, for instance, and the the most knowledgeable member of the Fed had just died. Have you read Friedman and Schwarz's seminal study? Yet, I think their incompetence was just an aggravation of forces set in motion by Congress and the administration. If you don't agree with me, then we simply disagree. I won't hold it against you.

[Dane]

Results had best be forthcoming soon or GWB will not be happy a year from November. When Herbert Hoover ran on the campaign slogan of "Prosperity is just arround the corner the result was 20 years of Democrat occupation of the White House

And when Roanld Reagan ran on "stay the course" and "It's morning in America", he won by one of the biggest landslides in American history.

[Dane]

Republicans are pushing Socialism and Keynesian economics like there's no tommorrow.

Huh? How are tax cuts socialist?

Like I said earlier, the economy wasn't great in 84 either(it was just starting to take off and many palces in the US were still suffering from the contraction in the late 70's and early 80's), and Ronald Reagan won by a landslide.

[txhurl]

China making a run for Tawain is also quite possible.

Sh*t. You just reminded me that China may very well wait until we can't afford to do anything about their messing with Taiwan.

This really is NOT looking good.

[B.Bumbleberry]

While you are at it study the the Fordney-McCumber Tariff Act of 1922 in which customs levels were increased to the highest levels in US history instead act as part of the greatest boom of prosperity the nation had ever seen, the Roaring Twenties.

You might want to check out your understanding of this as well. From what I remember about this tariff enactment, it was one on a limited set of commodities that roughly restored rates to levels that existed before a cut in 1913. Its effect was more than offset by two rounds of income tax cuts engineered by Andrew Mellon in the early twenties to eliminate increases enacted to fund the war. So we had a post-war economy with large tax cuts. If you want to attribute the boom that followed to tariff increases, or if you take from this that tariff increases don't matter, be my guest. Doesn't work for me, though.

[Elliott Jackalope]

Hello. First, I disagree with your argument. Second, I really appreciate how well you have made your point, and the fact that you can remain civil and rational while debating a highly charged issue.

Just FYI, I do believe in tariffs. I like the idea of having a mechanism to protect American industries from predatory actions by other nations. I'm of the opinion that the best tariffs are those that most closely equalize costs of production between foreign and domestic products. This allows consumers to base their purchase decisions on the quality of the product and the perceived value gained, instead of solely on price.

I saw how bad American cars got during the 70's, and I was happy to see Japan kick our auto industry in the butt, forcing them to make better cars that people actually wanted to buy. But I don't see how our interests would be served by allowing our domestic auto manufactures to simply go out of business due to foreign competition. Although this is not happening in the auto industry (yet), it has happened or is happening in a number of other industries.

However we may disagree, I will be happy to debate this issue with you. I've been hoping to find a rational and civil person to debate the pros and cons of free trade with.