Thursday, May 19, 2022 |
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• Smelling the coffee
Smelling the coffee
Although it’s too soon to say for sure, there are good signs that the American economy is finally waking up from its long snooze.
The numbers tell the story. Factory orders jumped 1.7 percent in June, raising hopes in the long-suffering smokestack sector. Retail sales were up 1.4 percent in July, their third monthly increase, evidence that consumers are still in a buying mood. The latest survey of purchasing managers showed surprisingly fast growth in the service sector, which makes up two-thirds of the economy.
Gross Domestic Product, which measures everything America produces, rose at a 2.4 percent annual rate from April through June – hardly scintillating, but moving in the right direction. That’s up from 1.4 percent in the first quarter, and the new figure is likely to be revised upward.
Profits at large companies jumped nearly 10 percent in the second quarter, compared to a year earlier, according to the Wall Street earnings tracking firm First Call. Higher profits are the key to stimulating business investment, which has been sorely lacking in the painfully slow recovery from the 2001 recession.
Together, the data show a groggy economy waking up from its long sleep, pulling on its socks and getting ready to go jogging.
But don’t break out the Gatorade yet. We’ve had false starts before. The numbers turned hopeful in mid-2002, until war drums from Iraq put much business on hold.
The Federal Reserve this week opined that chances of a sustainable growth are about even. To keep things moving, the Fed all but promised to keep short-term interest rates (those on credit cards and bank accounts) low for months to come. However, long-term interest rates, largely beyond the Fed’s control, jumped 1.6 percentage points in the past eight weeks. That makes mortgages and much business borrowing more expensive. But even at today’s 30-year rate of 6.4 percent, mortgages are still marvelously low when measured over the past three decades. As long as they stay about where they are, they’ll do little economic damage.
Jobs are the other big concern. We’re still losing them, amid signs the market is stabilizing. Why? Productivity. It now takes 4 percent fewer workers than it did a year ago to make the same amount of stuff. So the economy has to grow faster before businesses will need to add new workers.
The job drought hasn’t kept consumers from buying, notes economist Gary Thayer of A.G. Edwards, who thinks good times are on the way.
That would be good news for President George W. Bush. The 1992 election caught his father in the last economic malaise and cost him the White House. A healthy recovery could assure the son another four-year lease.
St. Louis Post-Dispatch
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