Friday, August 08, 2003

I do believe Stephen Roach at Morgan Stanley is channeling the same spirits as am I -- either that or he reads the Globblog! From Roach's commentary today:
  • On defense spending -- "there was more than the usual amount of statistical noise in the latest GDP report. A 44% annualized surge in defense outlays accounted for fully 70% of the total increase in national output. Barring the outbreak of another war, that source of growth is probably tapped out."
  • On consumer spending -- "personal consumption expenditures did increase at a 3.3% annual rate in 2Q03, well above the anemic 1.9% average annualized growth pace in the preceding two quarters. However, the bulk of those gains occurred for purchases of durable goods, whose share of real GDP has now risen to a record 11% -- so strong that it provides little scope for further improvement."
  • On jobs (or the lack thereof) -- "Since the economy bottomed in November 2001 (as per the recent cyclical dating of the National Bureau of Economic Research), private nonfarm payrolls have contracted by 1.2 million workers. By contrast, in the first 20 months of the past six business cycle upturns, the private-sector job count increased, on average, by 2.8 million workers. That means the current hiring trajectory has fallen fully 4 million workers short of the cyclical norm -- taking the concept of 'jobless recovery' that was first coined in the early 1990s to an entirely different level."
  • On wages and salaries -- "over the first 19 months of the current cyclical recovery, real private-sector wage and salary disbursements have recorded a cumulative increase of just 0.3%, far short of the 6.8% average gains that have occurred by similar junctures in the past six business cycle upturns."
  • On productivity -- "It all boils down to the essence of productivity enhancement -- whether efficiency gains are driven by synergies between human capital and technological innovation or by hard-nosed cost-cutting. . . . I must confess to being worried once again that the pendulum is swinging from good to bad productivity in the United States."
Roach thinks that 2003:III will probably look good on paper, but that this economy's "recovery" has the staying power of Bob Dole before Viagra.

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