Rapid Growth Seen for U.S. Economy

Friday, September 12, 2003

By Edmund L. Andrews

NYT Business Writer

By any measure, there is much evidence to suggest that the economy is about to grow more rapidly. Corporate profits have climbed much faster than expected over the last two quarters. Retail spending grew rapidly this summer, and many companies are suddenly scrambling to keep up with demand. Inventory levels have dropped to quite low levels, which usually means that companies have to increase production.

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More than a few economists say that the economy might expand at an annual rate of more than 5 percent in the final half of this year. According to the most recent Blue Chip survey of economic forecasters, the consensus forecast is that growth next year will be nearly 4 percent.

WASHINGTON -- NYT
The American economy finally seems poised to roar ahead at rates not seen since the late 1990's, but economists and some political analysts say the surge may not help President Bush's re-election campaign next year.

A wide range of data suggests that the economy will probably grow at an annual rate of nearly 5 percent in the final months of this year and nearly 4 percent next year — rates that would normally be spectacular news for an incumbent president.

But in a disparity with no real parallels in the last half-century, most economists predict that unemployment will remain almost unchanged at nearly 6 percent through the elections in November 2004.

The incongruous pattern of rapid growth with a stagnant job market stems primarily from an extraordinary gain in productivity, which has allowed companies to produce far more goods with far fewer people. Industrial production has jumped 5 percent since the last recession ended in late 2001, but companies have eliminated one million jobs over the same period.

The political fallout could be bigger than even the job statistics suggest, because most of the job losses have been in manufacturing, a significant sector for many of the most important swing states in the next election: Pennsylvania, Ohio, Michigan, Missouri and Illinois.

White House officials are keenly aware of the problem. In the last six weeks, Mr. Bush has traveled to Missouri twice and to Pennsylvania and Indiana to talk about his plans for creating jobs.

Acting on complaints from manufacturers that China has been manipulating its exchange rates to compete unfairly, Treasury Secretary John W. Snow openly urged the Chinese government this month to adopt flexible rates. Beijing agreed, but it rejected calls to move quickly in that direction.

Political analysts say voters need to feel for themselves that the economy is improving and that they need to start feeling that way by sometime next summer. Economists, meanwhile, worry that the economy could slow if employment does not pick up by sometime next spring.
(More: NYTimes.com)

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Dan