The Current State of the Economy
12 Comments Published by Dr. Beyster November 30th, 2009 in Competitiveness.I thought it might be interesting to take a look at the current state of the economy and see if there are any predictions to make. I’ve been around for quite a few years now, and if there’s one thing I’ve learned it’s that the economy is not really all that predictable. Sure, if you consider the big picture, we know that there have always been periodic business cycles—from boom to bust. But, as it turns out, these business cycles aren’t regular. When it comes to trying to predict exactly when we’ll reach the bottom of one cycle or the top of another—and what kinds of smaller economic events will happen along the way—that’s where things get dicey.
According to many economists, the recent recession is now behind us. However, it is clear that the aftereffects of the recession are going to linger for some time. So while the economy is on the upswing, there is still much pain to be felt by many in our nation. The worst may be over, but happy times aren’t here again, and there’s really no telling when they will arrive.
If you look at the current economic data, there is certainly room for optimism about the future.
According to the U.S. Department of Commerce, real gross domestic product increased at an annual rate of 2.8 percent during the third quarter of 2009, driven mostly by increases in consumer spending, exports, private inventory investment, federal government, spending, and residential fixed investment. Compare this to the second quarter of 2009, where real GDP decreased 0.7 percent. The Conference Board reported that its index of leading indicators increased in October to its highest point since September 2007—103.8. This is the seventh month in a row that the index has shown an increase. Consumer spending rose 0.7 percent in October, and during the week ended November 21, 2009, first-time claims for jobless benefits dropped by 35,000 to 466,000. This was significantly less than the figure of 500,000 predicted by many economists.
As I mentioned before, there is still plenty of economic pain to go around. The current national jobless rate is 10.2 percent. According to the Federal Reserve, the unemployment rate will remain above 8 percent through 2012. Mortgage delinquencies hit a record high of 14 percent in the third quarter. This represents 4 million Americans who are either behind in their mortgage payments or in foreclosure. And while consumers are spending more overall, early indications from Thanksgiving Weekend shoppers is not encouraging. According to the National Retail Federation, spending per shopper fell from $372.57 a year ago to $343.31 this year.
My personal concern is that much of the good economic news we are hearing has been driven by direct government intervention. The $787 billion economic stimulus has had an impact. The first-time homebuyer’s tax credit of $8,000—which was set to expire today, but which has been extended through April 30, 2010—has had an impact. Cash to Clunkers has had an impact. What will happen when these federal government cash injections and tax credits run their course? Will the recovery crash, or is it strong enough to walk on its own?
What do you think?
– Bob
I just finished reading John Bogle’s new book, “Enough” which gives his account of the last few years and his criticism of Wall Street’s greed. We almost had a catastrophic collapse of our financial system thanks to the creation of exceptionally highly leveraged financial instruments (credit default swaps, structured investment vehicles, collateral debt obligations, etc. etc) devised by the clever men on Wall Street to separate investment money away from serious investments. The cost of the present financial industry (their cut of the deal) is at an all time high; and they show no sign of changing until we really let the likes of AIG go down, and insist that companies losing money don’t pay their executives outlandish benefits.
I recommend Bogle’s book to you: You would concur in many of his observations.
Regards,
Dick.
I know that it may make economic sense for western societies to “Spend Themselves” out of a recession. That is, Consumers Drive the Economy. Yet to the contrary, I’m embarking upon a personal strategy of Saving More ~ Spending Less! It doesn’t make sense for me to Credit card charge a 3rd Flat Screen TV when my parents placed their 1st TV on a department store layaway plan. Perhaps we all could benefit from a return to a Biblical Levitical way of life. -Appreciate your perspective, Dr. B…
Dick,
The greed isn’t isolated to just Wall Street. Many companies have had a business model where employees pay for the equipment to do the work, where benefits are position dependent, where a health provider location lock-in is in effect (it requires you to use the medical facilities closest to the worksite), and a host of other nasty things.
Perhaps Wall Street (and other businesses) can take a lesson from Walt Havenstein’s playbook and not operate like that.
Andre: Thanks for your comments. Do I know you from SAIC or some other association in the past? I think your conservative approach to spending and the caution you have shown is appropriate at this time. — Bob
Dick: I presume John Bogle is the founder of the Vanguard organization. Let me know if I’m wrong. Only time will tell if Wall Street learns its lesson from the mess it put the country in a year ago. I have my doubts. — Bob
Damian: I’m sure many companies are cutting benefits to survive. Fortunately, SAIC doesn’t appear to be one of those. I think their new leader Walt Havenstein has the right attitude about taking care of the employees. Only time will tell. — Bob
Dr Beyster,
Am responding to your Dec 9th comment, “Do I know you from SAIC or some other association in the past?” Short answer is, No! I’m a Social Media Gruppie…
Became interested in your blog postings and Beyster Foundation along the Career Interest that I had/have with Desiring to work for SAIC as a Performance Psychologist @ Fort Hood, Tx.
Networking aside, I found myself really relating and following your observations and commentary. While I’m continuing to HOPE to eventually join the SAIC corporation, your Blog Feeds are permanently dropped into my MS Outlook email feed. BTW, SAIC Solutions is a great read. Perhaps, You may want to autograph a copy for Jay Leno; mail out to his agent with your “thanks” for appearing at the award event you attended a few months back. Nothing works to promote/market a Book or Oneself like “Ethically-Shameful-Genuine-Heartfelt promotion.
KUTGW {keep up the Good Work}, ‘Dr-B.’ ~Andre Valentino Milteer, Central Texas
Andre: That’s a good idea about sending a book to Jay Leno — we’ll do that. In addition, please send me your resume. I’ll see if I can help you with SAIC. — Bob
Bob,
I came upon your blog through a Google Alert message that had me mentioned in a June 2, 2006 post that I was unaware of at the time.
Regarding the economy, the major comment that I hear from my Penn State Executive Education commericial customers is that “we are doing better at lower levels.”
This, unfortunately, is not good news … companies need to grow to prosper not just cut their way to greater profits. Therfore, I think the major issue for 2010 will be top line growth – either organically or inorganically. However it occurs, it’s what’s needed to move the capitalistic economic engine forward.
When I was interviewed by Business Week a few months ago on trends to watch for 2010, I said that M&A may again become a hot commodity. Time will tell but as strategic plans and budgets are being finalized for the new year, I expect more companies will increase their appetite for acquisitions.
Wishing you all the very best in 2010.
Pat
State College, PA – home of the Nittany Lions!
Pat: Good to hear from you. What has happened to you since you left Telcordia? I remember the good times we had when we worked together. I am happily retired now, spending most of my time with my family here in San Diego. I’m working to help my daughter Mary Ann with the activities of the Foundation for Enterprise Development, managing my finances, and in my spare time getting out on my motorboat. We have enjoyed our trips along the California coast. — Bob
Hi Dr,
I am a returning student (mid 40′s) and like you have been around a bit. However, I am a few credits shy of my BA in Business and in the process of writing an essay for my macroeconomics course and came upon your site.
First off, after reading almost everything I could find on the current state of the economy via google, msn, scholarly and journal articles I have to readily and adamantly admit you should be advising President Obama.
Granted, that is just my opinion, however, I cannot see how anyone with any common sense and background (even a course or two) in economics could argue against your view, wisdom, and insight.
With your permission it would be my honor to reference your short essay or blog if you will in my essay to my macroeconomics professor.
Thank you for your consideration with this matter.
Respectfully yours,
Roger J. Hourihan, ATA, ATP
Roger: Thank you for the very nice response to my blog. I’m glad you found some useful information. Don’t hesitate to use it in your essay. And please keep up the communication with me. — Bob