Free Newsletters - Space News - Defense Alert - Environment Report - Energy Monitor
. Earth Science News .




POLITICAL ECONOMY
Outside View: GDP growth revised up but outlook remains treacherous
by Peter Morici
College Park, Md. (UPI) Aug 29, 2013


disclaimer: image is for illustration purposes only

U.S. gross domestic product growth was revised up for the second quarter to 2.5 percent from 1.7 percent because the trade deficit was much smaller than originally estimated and investments in inventory were revised upward.

The trade gap remains a substantial drag on economy and continued improvements will be needed to main stronger growth. Continued slow growth in consumer spending indicates household balance sheets haven't strengthened enough to instigate more robust growth in the second half.

Small businesses are expressing more optimism through sentiment surveys; however, they aren't spending enough on new structures and capital goods to ignite stronger growth.

Businesses of all sizes remain wary about Obamacare mandates, more cumbersome and costly business regulations and global economic and political conditions. Managers are inclined to squeeze more production out of existing facilities to meet moderately growing demand and remain cautious about adding full-time workers.

Since January, 936,000 more Americans report working part time, while only 27,000 more say they have obtained full-time employment. This shift places downward pressure on wages, which have increased less than 1 percent over the last six months.

Rising mortgage rates in anticipation that the Federal Reserve will scale purchases of mortgage back securities and longer-term Treasury debt are slowing new home sales.

Overall, economists expect growth to continue at a somewhat stronger pace in the second half of the year but that will require continued improvements in the trade deficit, stable oil prices and for Congress and U.S. President Barack Obama to reach an agreement to raise the debt ceiling in October with not too much drama.

The failure of House Republicans, Senate Democrats and Obama to reach a compromise on fiscal year 2014 budget is less menacing. A continuing resolution to maintain current outlays, subject to further spending cuts through sequestration, would slow the economy much less than a compromise budget. The latter would almost certainly entail higher taxes to appease the president and the tax increases he obtained in January are already slowing growth and jobs creation.

Since mid 2009, GDP growth has averaged a paltry 2.2 percent, whereas following a deeper recession the Reagan recovery produced 5 percent growth over a comparable time span.

Expectations of permanently slower growth are hardening disturbing changes in the structure of the labor market and social conditions. These days, new college graduates often work at unpaid internships while taking part-time jobs at places like Starbucks to meet minimal living expenses.

Many young people have no prospects for meaningful permanent employment and, saddled with burdensome education loans, continue to live with parents and postpone marriage into their late 20s and 30s. All this slows new home new home construction, purchases of appliances and suppresses the birth rate -- nothing drives consumer spending like babies and we are simply not getting enough middle-class births.

The Federal Reserve by scaling back Quantitative Easing 3 this fall would exacerbate these conditions but it may have little choice. Historically low interests rates have inspired Wall Street speculators to rush to purchase homes and created distortions in other asset markets, such as for agricultural land, and stocks and bonds. Destructive bubbles could cause another deep recession.

The Fed is between a rock and hard place. Obama administration policies are decidedly anti-growth -- for example, the failure to confront China on the undervalued yuan; failure to approve more offshore drilling; failure to properly regulate banks, causing both loan shortages for good businesses and too many bad loans for questionable enterprises; healthcare policies that raise benefits costs and slow hiring; and regulatory overreach elsewhere that stifles manufacturing investment.

If the Fed slows bond purchases, it risks torpedoing a fragile recovery. If it continues easy money policies, distortions in asset markets continue to grow and new bubbles will threaten another financial crisis.

(Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist.)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)

.


Related Links
The Economy






Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks
del.icio.usdel.icio.us DiggDigg RedditReddit GoogleGoogle




Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News





POLITICAL ECONOMY
Caution urged on European growth prospects
Brussels (UPI) Aug 23, 2013
Markets buoyed by minuscule growth data from Europe were served cautionary advice by think tanks and analysts who remain skeptical of an early turn in troubled eurozone's fortunes. Eurozone consumer confidence rose in August compared with July, the European Commission said in a flash estimate Friday, but independent financial analysts warned against reading too much in recent upbeat ass ... read more


POLITICAL ECONOMY
U.N. condemns Australia's treatment of refugees

Raytheon provides public safety a bridge from land mobile radios to smartphones and tablets

Mutualink Unveils Google Glass for Public Safety

Russia convicts officials of 2012 floods negligence

POLITICAL ECONOMY
Creating a Secure, Private Internet and Cloud at the Tactical Edge

Sticking power of plant polyphenols used in new coatings

First Report of Real-Time Manipulation and Control of Nuclear Spin Noise

Lab-made complexes are "sun sponges"

POLITICAL ECONOMY
Pacific summit aims to renew global climate efforts

New skin-eating fungus is killing Dutch salamanders

China invests cash, expertise in Argentine dams, railroad

US, Sweden unveil $25 mln clean water technology grant

POLITICAL ECONOMY
Warming Antarctic seas likely to impact on krill habitats

Change of Venue for NASA's IceBridge Antarctic Operations

UM Researcher Finds Loss of Sea Ice Causes Ecological Changes

UM Scientists Use New Approach to Reveal Function of Greenland's Ice Sheet

POLITICAL ECONOMY
New Zealand wants answers on milk 'botulism botch-up'

Cattle ranching goes green in the Brazilian Amazon

Study: Ogallala Aquifer being drained by U.S. farmers

Syngenta, Bayer challenge EU bee-saving pesticide ban

POLITICAL ECONOMY
6.5 quake hits southern Guatemala: USGS

At least 23 dead in floods in Mali capital: government

Taiwan puts troops on standby amid storm warning

Amur flooding breaks records in China: state media

POLITICAL ECONOMY
Kenyan soldiers kill al-Shabaab guerillas

Kenya looks east, signs $5-bn China deals

South Sudan arrests general for rights violations

Mali court confirms Keita's landslide election win

POLITICAL ECONOMY
Researchers reveal hunter-gatherers' taste for spice

Building better brain implants: The challenge of longevity

Researchers say human foot not unique, more like those of great apes

Archaeologists find evidence of separate Neanderthal cultures in Europe




The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement