March 14, 2003

Declining Growth Forecasts

The chance that the unemployment rate would fall this year has been low for quite a while. Now I can't see more than one chance in five of an improved labor market by late fall. - Economists Scale Back Forecasts for First Half: ...In a $10 trillion economy, this drumbeat of declining expectations takes a toll. The downgrades between last month and this one amount to about $29 billion in annual economic output that was expected but now seems unlikely to materialize anytime soon. That averages to about $100 of expected output per person that won't be realized.

"The outlook is rather grim," says Richard Yamarone, director of economic research at Argus Research Corp. in New York. "Employment has eroded, energy prices are soaring and business investment isn't likely to register any meaningful gain, given the lackluster projection for corporate profits." He cut his growth estimate for the first quarter to 1.4%, from 2% estimated a month ago. About three in four economists surveyed lowered their forecasts.

Economists cited a number of reasons for their growing economic pessimism, but one issue stood out. When asked to name the major factor responsible for the economic malaise, 50% cited "war jitters," which many said have caused high levels of uncertainty among businesses and consumers. An additional 19% of respondents cited rising oil prices, which are partly associated with war fears...

Posted by DeLong at March 14, 2003 02:11 PM | TrackBack


Sadly, I agree.

Posted by: anne on March 14, 2003 02:18 PM

"When asked to name the major factor responsible for the economic malaise, 50% cited "war jitters,"

Follow the lemmings off the cliff everyone. What consumer has changed purchasing habits based on "war jitters"? And some businesses may hesitate to invest because of the war, but I'm sure it is a minority. If you were good at playing "Simon Says" when you were five years old then there is a good Wall Street job waiting for you.

Posted by: Dan on March 14, 2003 11:21 PM

Alan Greenspan and on, the problems are war jitters. Need a scarf, war jitters. Not need a scarf, war jitters. Buy a scarf, war jitters. Not buy, even more so.

The economy has slowed markedly. In February the producer prices were up 1%, but absent energy the index was down .5%. Energy price jumps may be partly war jitters, but the general loss of pricing power appears to be a serious month to month slow growth problem that may have almost nothing to do with the prospect of a war.

Posted by: jd on March 15, 2003 09:46 AM

My joke about how bad things have gotten in the past few months is that the various business rag pundits are now admitting that there might be problems. For the past two years, there has been one theme 'we were in a bad economy, but things will get good starting tomorrow'. Now, that optimism is in the minority.

Posted by: Barry on March 15, 2003 02:21 PM

Always the same these two years - The economcy is really fine beneath the numbers, and getting better. Sell bonds, buy tech. Well, buy tech at any time from 1995 on, especially by 2000. I guess it really is time to sell bonds now and buy the index, no matter the weak economy, so give Dow 3,600 and company credit after all is done.

Posted by: dahl on March 15, 2003 02:33 PM

Iraq and "geopolitical risk" seem to be inextricably linked. What are the odds that the link is not so complete as it looks? What if there are - oh my! - geopolitical risks beyond Iraq? North Korea is high on lots of non-White House lists, but there have been enough little brush fires around the world in recent years to keep us worried. "Esquire" offers an argument that the US ought to be fighting Iraq-style wars in lots more place. Take a look at:

Posted by: K Harris on March 17, 2003 11:22 AM
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