How will economic growth proceed over the coming year? While the impact of high energy prices is worrisome the overall trend looks robust to me.

The ISM Manufacturing Survey is strong

Not that manufacturers are reporting”better” conditions than the ever did during the 1990s and during most of the 00s. Maybe this won’t last but outside of energy prices there is nothing clearly on the horizon to make it stop.

Moreover, rapid growth in Brazil and China lays the groundwork for strong manufacturing in the US. Some of that will come about as US companies provide the business inputs – jet planes and bulldozers – for the developing world. Some of it will come about as more richer consumers in those countries begin consuming US products. Some of it will come about through a slowdown in off-shoring and in some industries the possibility of manufacturing returning to the US. 

This still seems distant for most production but even a slowdown in manufacturing going overseas will mean an increase in US manufacturing’s outlook.

The death spiral of construction – investment in structures to be more specific – seems to be petering out. Notice the year-over-year growth rate has been negative for, count them, five years now

FRED Graph

Growth in Equipment and Software has rebounded

FRED Graph

Even on payrolls, if we take the long view, the growth rate, looks symmetric and on the whole moving in the right direction

FRED Graph

If you look at the 90s recession and to an even greater extent the 00s recession there is a tilt in the growth rate. This implies that payroll growth fell much faster than it rebounded. That lean isn’t readily apparent in the current recession.

To be sure the fall was longer and deeper but the overall shape is largely symmetric.

A closer view shows how the dynamics of this recession differ from the last

FRED Graph

Looking at the log of the level of employment we see a couple things. First, the drop has a S-shape rather than slow downward slide.  Second, the growth rate since the bottom of this employment cycle is almost as strong as the growth rate from the bottom of the last cycle. Though it has come 6 months earlier.


There are difficulties facing us and a huge employment problem that should not be ignored. However, the dynamics look like growth.

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