Nation's economy on track for best growth in 20 years
CRUTSINGER; The Associated Press
The News Tribune
WASHINGTON - The economy appears headed for a banner year despite
a springtime spike in energy prices and a recent increase in interest
In fact, many analysts are forecasting the overall economy, as measured
by the gross domestic product, will grow by 4.6 percent or better
this year, the fastest in two decades.
There were strong 4.5 percent growth rates in 1997 and 1999, when
Bill Clinton was president and the country was in the midst of a record
But if this year's growth ends up a bit faster than that, it will
be the best since the economy roared ahead at a 7.2 percent rate in
1984, a year when another Republican president - Ronald Reagan - was
running for re-election.
"We are moving into a sweet spot for the economy with interest
rates not too high, jobs coming back and business investment providing
strength," said Diane Swonk, chief economist at Bank One, who
predicts GDP growth of 4.8 percent this year.
President Bush is highlighting the improving economy at every opportunity,
while Democratic challenger John Kerry has focused on what he calls
a middle-class squeeze of rising health and tuition costs and laid-off
workers forced to take lower-paying jobs.
Who will win on the all-important pocketbook issues? Economists aren't
"It is unclear whether voters will remember the past year and
the better jobs created during that period or the past four years,"
said Mark Zandi, chief economist at Economy.com. "It will be
a close call, and that is one of the reasons the election could be
Assessing the economy at midyear, most private economists are sticking
with the optimistic forecasts they had six months ago, even though
inflation, driven by surging energy prices, rose higher than expected
and the Federal Reserve started raising interest rates last month.
"We are looking for a darn good year despite the fact that we
had a big jump in oil prices and interest rates are going up faster
than people thought would occur," said David Wyss, chief economist
at Standard & Poor's in New York.
Offsetting those drags on the economy has been:
•Stronger growth in Japan and China, which helps U.S. exports.
•Better-than-expected consumer spending.
•Better job growth than analysts expected as the year began.
The economy has now created 1.5 million jobs since last August, compared
with a loss of 2.7 million jobs in the previous 29 months, when the
country was struggling with a string of blows from a collapsing stock
market to a recession and terrorist attacks.
Even with the 10 months of consecutive job gains, Bush is still facing
a 1.2 million jobs deficit, from the last peak for employment in March
However, many analysts anticipate the economy will generate around
200,000 jobs per month over the next six months, a pace that would
be enough to erase his deficit figure by the end of the year. That
would enable him to escape being the only president since Herbert
Hoover in the Great Depression to have lost jobs while in office.
Although the economy created only 112,000 jobs in June, after averaging
304,000 jobs for the previous three months, analysts expect strong
job growth the rest of this year.
They predict the unemployment rate - stuck at 5.6 percent for most
of this year - will improve gradually, to 5.3 percent by December,
as a strengthening job market draws people back into the labor force.
A survey of one group of top economic forecasters showed their optimism.
Ninety-one percent said they expect the economy to grow at an annual
rate of anywhere from 2 to 5 percent in the second half of this year,
according to a quarterly survey released today by the National Association
for Business Economics.
Forty-one percent said they expect stepped-up hiring in the next six
months, while 45 percent expect no change and 14 percent expect a
"By almost any measure - output, employment, profit margins,
capital spending - this economy is strong," said Duncan Meldrum,
the association's president and the chief economist for Air Products
and Chemicals Inc.
The Bond Market Association's economic advisory committee, made up
of economists from large financial institutions, is predicting consumer
prices will rise 3.1 percent for all of this year, a significant moderation
from the 5.1 percent rate of increase through May.
The group projects overall GDP growth will be at a 20-year high of
An upbeat view
What economists predict by year-end:
• Gross domestic product growth: 4.6 percent
• Some 2.7 million new jobs, beginning in August 2003
• 5.3 percent national unemployment rate
• Inflation rate of 3.1 percent