For many months, over a year in fact, I've been very positive about the US economy and believed it would rebound. Many on this board did not share my opinions and I was often a lone voice. There was an article on the front page of today's WSJ which might explain our radically different opions. The good news (which has been influencing my opinions) is that we're not in a recession. The GDP has been expanding at an average annual rate of 2.7% since 2001Q4. Unemployment remains at about 6%, only slightly higher then the average of 5.6% for the last 55 years. The unemployment rate for mathematicians and computer scientists (which I'm guessing includes others in software) is also only 6%, as of the end of 2002 (although it rose all the way from 0.7% back in Feb 1998, so it's a significant relative change). Here's the bad news. Worker productivity is up 4.2% Thanks to the great job we did during the boom, companies have tools to make workers more productive and they are using it to the full extent. This downturn is unique in that the GDP growth is being outpaced by worker productivity growth. So although the economy is growing, comapnies can meet the growth without additional hiring. A study by the Fed in NY suggests that most industries are restructuring. It used to be that only certain industries went through cycles which required such changes. Now it is more widespread (75% of industries instead of 50%, of the 30 industries studied), and so effecting people in different industries and at all levels, from blue-collar to executive. There is also an outsourcing issue, although the article seemed to consider this secondary. (Some good news: the changes in industries aren't all negative. Healthcare added 522,000 jobs in the last 2 years, and education added 190,000.) So it looks like demand just needs to creep up a little more to outpace productivity growth. It almost makes me think the tax cut might work (almost, I'm still pretty skeptical of it). --Mark
So it looks like demand just needs to creep up a little more to outpace productivity growth. It almost makes me think the tax cut might work (almost, I'm still pretty skeptical of it). --Mark[/QB]
Tax Cut by itself will not be the cause of the Boom that is yet to come. The 300Billion tax cut will support the economy to some extent as it will encourage the consumer to buy products. But it is just like an appetizer. The steps taken by corporate america to be competitive will have a lot of effect on the future economy.
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