| Page 2 of 2 < |
Where Is the Economy Headed?
A Georgia Power worker repairs a line in Atlanta. Worker productivity grew at an annual rate of 0.2 percent in the third quarter, sharply lower than in the second quarter but beating the Labor Department's earlier estimate.
(By Chris Rank -- Bloomberg News)
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
The disagreement is over what comes next.
Fed Chairman Ben S. Bernanke said last week that he foresees moderate economic growth over the next year. Analysts peg that somewhere between a 1 and a 2.6 percent pace, which would be slower than the economy's long-term average.
Bernanke sounded "a little over-optimistic" but not far off, Behravesh said.
"I don't think there is going to be a recession next year," Behravesh said, noting that housing accounts for only about 6 percent of the economy -- enough to slow growth significantly but not stop it.
On the contrary, he said, consumers are spending more because of low 4.4 percent unemployment, decent income growth, rising stock wealth and lower fuel prices. And businesses are exporting more goods to faster-growing economies overseas.
"All the bad signals coming out have to do with housing, and to a lesser extent autos," he said. "Basically, the rest of the economy is giving out reasonably good signals."
Others foresee a darker picture next year, in which consumers pull back more sharply on spending because of rising unemployment, heavy debt and falling home prices.
"I do think in the first part of next year we'll have a recession, and it could be a difficult one," said Charles W. McMillion, chief economist at MBG Information Services, an economic consultancy.
McMillion pointed to the Labor Department's drastic lowering of its estimates of workers' wages and benefits in the spring and summer. According to the figures released yesterday, hourly compensation rose at a 2.6 percent annual rate in the third quarter, down from its earlier estimate of 3.7 percent growth. And the department said compensation fell at a 1.2 percent pace in the second quarter, a reversal of its earlier estimate of 6.6 percent growth.
To financial markets, those figures looked like good news because stronger productivity growth and weaker compensation gains mean less inflationary pressure. That bolstered expectations that the Fed will hold interest rates steady at its policymaking meeting next week, and maybe lower them next year.
But McMillion said consumers and the economy are likely to buckle in coming months. "Stagnant productivity and falling wages is not a healthy combination," he said.
