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US economy BOOM

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
Productivity Expands at a Faster Pace
AP | Dec 06 | MARTIN CRUTSINGER, Economics Writer

WASHINGTON - The productivity of American workers shot up at the fastest pace in two years during the July-September quarter, helping to ease fears that inflation pressures were threatening to get out of hand. The Labor Department reported Tuesday that productivity, the key component for rising living standards, rose at an annual rate of 4.7 percent during the summer, a big upward revision from the 4.1 percent initial estimate made a month ago.

The big jump in worker efficiency help to push labor costs down by 1 percent at an annual rate in third quarter, double the 0.5 percent drop in unit labor costs that had originally been reported. The stronger productivity and falling labor costs should help ease fears at the Federal Reserve that overall inflation was on the verge of worsening because of rising wage pressures.

Productivity is the key factor that determines whether living standards are improving. Gains in productivity allow companies to pay their workers higher salaries from their increased production without having to increase the price of the products they sell, which would fuel inflation.

The Fed is closely monitoring productivity and unit labor costs as it determines how fast it needs to boost interest rates to keep inflation from appearing.

Good gains in productivity and small increases in labor costs have allowed the central bank to boost interest rates at a gradual pace over the past 18 months. Analysts are looking for two more quarter- point rate hikes in December and January, the final two meetings for Chairman Alan Greenspan. And they believe his designated successor, Ben Bernanke, will keep raising rates at least in the early months of his tenure.

The 4.7 percent rate of increase for productivity in the third quarter was sharply higher than the 2.1 percent increase for the April-June quarter. It was the best showing since a 9.6 percent surge in the third quarter of 2003.

The 1 percent drop in unit labor costs marked the second consecutive quarter that labor costs have fallen after three quarters of big increases that had raised worries that wage pressures were beginning to mount. Unit labor costs declined at a 1.2 percent rate in the second quarter.

The upward revision in productivity reflected the fact that the government last week revised upward overall economic growth for the third quarter to an annual rate of 4.3 percent. It had originally estimated that the gross domestic product was growing at a 3.8 percent rate in the third quarter.

The increased amount of output meant that workers had produced more per hour of work than originally estimated.

President Bush, battling the lowest approval ratings of his presidency, is seeking to draw attention to a spate of recent indicators showing that the economy has regained its footing following the blows from the Gulf Coast hurricanes and a surge in energy prices.

In a North Carolina speech on Monday, Bush declared that "this economy is strong and the best days are yet to come for the American economy."

In addition to the solid upward revision to GDP and productivity, the government on Friday reported that employment grew by a solid 215,000 in November, ending a two-month lull which had reflected sizable layoffs in New Orleans and other areas along the Gulf Coast where businesses had been devastated by hurricanes Katrina and Rita.
 

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
He motivates reinvestment of profits back in companies through lower taxes.

I can personally attest to this as can anyone else who runs a business.
 

Westy

the teste
Nov 22, 2002
38,213
4,997
Sleazattle
N8 said:
He motivates reinvestment of profits back in companies through lower taxes.

I can personally attest to this as can anyone else who runs a business.
So witht the economy in a "boom" we should see the a reduction of the deficit? Or are we just borrowing money for prosperity now?

Don't worry N8, I don't actually expect you to answer this.
 

LordOpie

MOTHER HEN
Oct 17, 2002
21,027
3
Denver
N8 said:
He motivates reinvestment of profits back in companies through lower taxes.

I can personally attest to this as can anyone else who runs a business.
umm, isn't that the opposite?

Profits are after expenses, if taxes are lower, the principles will be more encouraged to take more of the profits for themselves, yeah? If taxes are higher, wouldn't a company want to dump the money back into the company as a way to "hide" them being taxed?

So wouldn't' higher taxes encourage re-investment?
 

LordOpie

MOTHER HEN
Oct 17, 2002
21,027
3
Denver
Westy said:
So witht the economy in a "boom" we should see the a reduction of the deficit? Or are we just borrowing money for prosperity now?

Don't worry N8, I don't actually expect you to answer this.
I'd hope they'd put the money back into the social services that they've been stealing from... like social security, medicare, etc.
 

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
Westy said:
So witht the economy in a "boom" we should see the a reduction of the deficit? Or are we just borrowing money for prosperity now?

Don't worry N8, I don't actually expect you to answer this.
Myth... ? Or should you blame Congress for it?


The Deficit Reduction Myth
by Bert McLachlan
Tuesday, December 06, 2005


Congress is treating the deficit as a big joke, but surely most people aren't so stupid as to think that "deficit reduction" is really that.

Congress has outspent its own income in 45 of the last 50 years, thereby running up deficits by over $5 trillion. But $4 trillion of those deficits were in just the last 20 years. And then President Bush's budget submission this last February projected $3 trillion more of deficits in just the next 6 years. That is how much Congress itself actually spends in excess of its own income tax revenue. In government lingo, those are the real "on-budget" numbers.

That clearly isn't something Congress wants everyone to know about. So it disguises what it is doing. How? In three simple steps: (1) it takes out all the (really "off-budget") excess money coming into the Social Security retirement fund, that is supposed to be saved for future retirees' checks, (2) considers it as "income" for Congress and uses it all to pay Congress's own bills, and then (3) subtracts that "income" from Congress's own losses and reports only the total to the public as "the" budget.

But people might actually get alarmed if they knew that Congress itself really spent about $1.42 for every $1.00 of its own income tax revenue in both fiscal 2003 and 2004, setting all-time percentage and dollar deficit records. So President Bush has assured us that "deficit reduction" will cut "the" deficit in half by 2009.

First, there must have been a decision made to try to fool the public as to what was being done. The total budget deficit for 2004 had been projected to be $521 billion, far and away the highest ever. It would have exceeded even the previous record actual deficit of $378 billion in 2003 by 38%. But in fact the actual 2004 deficit came in at "only" $412 billion, thus still setting a new national record.

Now guess what the starting point for measuring "deficit reduction" was picked to be? You're right: the never-realized $521 billion budget of 2004. In other words, the deficit is to be reduced from a level that it never (thankfully) even reached.

And the goal is to cut that $521 billion in half, meaning that the goal is to cut $261 billion out of the total deficit annually by 2009.

What those in Washington must mistakenly think is a secret is that $184 billion (or 70%) of the "cutting" was already done on paper before the actual "deficit reduction" even began. The first $109 billion was of course the difference between the $521 billion budget and the record $412 billion actual in 2004. That was $109 billion of "deficit" that never really even happened. The second $75 billion comes from the way Congress covers up its actual deficits by adding in the Social Security surplus.

The Social Security surplus was $155 billion in 2004 and is projected to be $230 billion in 2009. All that revenue is supposed to be "saved" to pay the future retirement checks of the baby boomers. Taking that additional $75 billion a year out of the retirement fund and spending it is the second big way that "the" total reported deficit will be "reduced". The more Congress can take out of the retirement fund and spend, the better their reported deficit looks.

So if we keep Social Security out of the totals, Congress's real plan is to "cut" its own deficit by only the remaining $77 billion. That is only about 4% of the expected total that Congress anticipates spending in 2009.

As a result, President Bush's recent budget submission projects that, when "deficit reduction" is completed, Congress itself will really have in the year 2009 an ("on-budget") deficit of $463 billion. That is still spending of about $1.24 for every $1.00 of income tax revenue. And meanwhile government spending is forecast to go up by $600 billion per year, or 45%, in just the five years from 2004 to 2009.

Of course in the five years through 2009, bigger and bigger annual amounts (totaling to almost $1 trillion) will be in effect embezzled from the retirement fund and spent to cover the government's perpetual spending appetite. So by the year 2009 Congress will be able to cover up its own actual annual $463 billion deficit by subtracting the $230 billion taken from Social Security, and telling us that "the" (net) deficit will thereby be "only" $233 billion that year.

If those in Washington wonder why inflation is coming on, why everyone is alarmed about the prospects for retirement income, and why the dollar is headed further down the tubes in the foreign currency markets, they should realize that the rest of the world does know what is going on, even if Congress doesn't.
 

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
LordOpie said:
umm, isn't that the opposite?

Profits are after expenses, if taxes are lower, the principles will be more encouraged to take more of the profits for themselves, yeah? If taxes are higher, wouldn't a company want to dump the money back into the company as a way to "hide" them being taxed?

So wouldn't' higher taxes encourage re-investment?

Look at oil companies for example... they are reinvesting their money on a mad drilling spree... and other ventures.
 

LordOpie

MOTHER HEN
Oct 17, 2002
21,027
3
Denver
N8 said:
Look at oil companies for example... they are reinvesting their money on a mad drilling spree... and other ventures.
that's not relevant to the tax discussion.

ceterus paribus... higher taxes encourages more re-investment, yeah?
 

Westy

the teste
Nov 22, 2002
38,213
4,997
Sleazattle
LordOpie said:
that's not relevant to the tax discussion.

ceterus paribus... higher taxes encourages more re-investment, yeah?
No doubt. A company that reinvests has higher costs and fewer taxable profits. Not to mention the oil industry is a poor representative of the economy as a whole.
 

DRB

unemployed bum
Oct 24, 2002
15,243
0
Watchin' you. Writing it all down.
N8 said:
Look at oil companies for example... they are reinvesting their money on a mad drilling spree... and other ventures.
Oh N8, you really should stick to what you know.

You think that billions in profit that oil companies are currently realizing have anything to do with Bush's tax cuts?

Mad drilling spree?

And more importantly, how much of that money (profit or tax cuts) actually find their way back into the US economy either in the form of lower fuel prices or increased investment? Especially compared to the amount of money that finds its way back of the US into investment elsewhere.
 

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
DRB said:
Oh N8, you really should stick to what you know.

You think that billions in profit that oil companies are currently realizing have anything to do with Bush's tax cuts?

Mad drilling spree?

And more importantly, how much of that money (profit or tax cuts) actually find their way back into the US economy either in the form of lower fuel prices or increased investment? Especially compared to the amount of money that finds its way back of the US into investment elsewhere.
Ok... my bad... sheesh.
 

Westy

the teste
Nov 22, 2002
38,213
4,997
Sleazattle
DRB said:
Oh N8, you really should stick to what you know.

You think that billions in profit that oil companies are currently realizing have anything to do with Bush's tax cuts?

Mad drilling spree?

And more importantly, how much of that money (profit or tax cuts) actually find their way back into the US economy either in the form of lower fuel prices or increased investment? Especially compared to the amount of money that finds its way back of the US into investment elsewhere.
Off topic question, it has been a long time since I took economics. There has been a lot of talk on local levels about cutting state taxes on gas to reduce the price for consumers. But it in an open market the price is determined by supply and demand. If taxes were increased wouldn't the the price stay the same and simply reduce the profits made by the oil companies, unless the oil companies are acutally price gouging.
 

Westy

the teste
Nov 22, 2002
38,213
4,997
Sleazattle
N8 said:
So states/countries with high tax rates have the lions share of profitable businesses?

It would depend more on the cost/benefit ratio of the taxes than the actual tax rate. A state or nation with low taxes and crappy schools that graduate morons will not provide good workers and the companies would have to spend more to train. The same can be said for infrastructure, health care etc.
 

LordOpie

MOTHER HEN
Oct 17, 2002
21,027
3
Denver
Westy said:
Um, the productivity increases in your original post. Driven by technological advances.
There's an increase in productivity as well as slackerness.

I'm far more productive and I slack even more too :blah:
 

LordOpie

MOTHER HEN
Oct 17, 2002
21,027
3
Denver
Westy said:
Off topic question, it has been a long time since I took economics. There has been a lot of talk on local levels about cutting state taxes on gas to reduce the price for consumers. But it in an open market the price is determined by supply and demand. If taxes were increased wouldn't the the price stay the same and simply reduce the profits made by the oil companies, unless the oil companies are acutally price gouging.
I think supply and demand, at it's most basic, is only truly seen for homogenous products. When you approach monopolistic products -- like oil which has an extremely high cost to entry... damn, forgot where I was going specifically, stupid work.

Anyway, oil companies want a minimum amount of return on investment, so they'll still sell at a price to get that ROI. Regardless of taxes, so increase in taxes mean an increase in total price. If prices remain the same, it'd be the individual gas station getting the shaft... which is a complaint by them against the large chain run operations.

sorry for a convoluted post, hope you understood what I was trying to say.
 

Westy

the teste
Nov 22, 2002
38,213
4,997
Sleazattle
LordOpie said:
There's an increase in productivity as well as slackerness.

I'm far more productive and I slack even more too :blah:
I've been working much harder the past few months. I am so brilliantly productive it affects things on a national level. I am going to start slacking off after Christmas, you'll see the economy slow down.
 

DRB

unemployed bum
Oct 24, 2002
15,243
0
Watchin' you. Writing it all down.
Westy said:
Off topic question, it has been a long time since I took economics. There has been a lot of talk on local levels about cutting state taxes on gas to reduce the price for consumers. But it in an open market the price is determined by supply and demand. If taxes were increased wouldn't the the price stay the same and simply reduce the profits made by the oil companies, unless the oil companies are acutally price gouging.
But price isn't solely determined by supply and demand even in an open market. It is also determined by cost factors. If all of a sudden the price of oil widgets goes up for the industry as a whole, they the price of oil goes up as well. The supply and demand have remained static and the price still went up.

Tax can be considered a cost factor. Now the trick is whether they can pass those cost factors along to the consumer. In most cases, tax increases, in whole or at least in part, are immediately passed thru the supply chain to the end consumer. This is true of any industry. The factors that affect this basically boil down to two. First what will your competitors do. Secondly and more important how much light is being cast on the increases.

With the current climate the way it is, it would be unlikely that any tax increases/windfall taxes would be pushed all the way thru to the consumer immediately. However, over time I fully expect that those costs like any costs are ultimately going to be paid by the consumer.

That doesn't address the other side of the issue, tax decreases. Again two main factors, the first being the same as one for increases, the amount of publicity. But in this case the second is more important, how far from the consumer in the supply chain is the tax being decreased. The farther up the chain that tax is being cut, the less likely that the consumer is going to see an impact. Everyone is going to take a little bit of the tax cut before it moves to the next link in the chain. But in order to finish this up let's put it on the cost of a gallon of gas which is right at the consumer. Immediately the customer is going to see lower prices.

Here is where the Supply and Demand part comes seriously into play. As the gas company, I know that at some point in the past my customer was willing to pay 1.00 a gallon. Now the tax cut has reduced that to .95. My goal is going to be to get the price back to 1.00 as soon as I can get away with it and it typically doesn't take too long. Normally, it occurs during times when demand goes up (holiday seasons) and then they simply don't go all the way back down when demand lessens.

Now none of this drivel actually addresses where the newly realized profit from tax cuts gets utilitzed. That's a different topic.
 

dan-o

Turbo Monkey
Jun 30, 2004
6,207
2,416
Westy said:
I am so brilliantly productive it affects things on a national level. I am going to start slacking off after Christmas, you'll see the economy slow down.
If we keep sending jobs offshore, eventually, this will be true.
 

Changleen

Paranoid Member
Jan 9, 2004
9,902
5
Hypernormality
In the end it's pretty simple - Government is spending more than it makes. No matter how you look at it, in the long run this is unsustainable. Lowering taxes whilst spending even more is especially stupid. The US economy may be growing (good) but it's not growing fast enough, indeed it would not be good for it to grow fast enough to keep pace with the current spending gap.
 

Reactor

Turbo Monkey
Apr 5, 2005
3,978
1
Chandler, AZ, USA
Eventually someone with a less tenuous connection to reality will be elected and get the job of being the bad guy and raising taxes to pay for the spending/tax cutting binge.
 

Westy

the teste
Nov 22, 2002
38,213
4,997
Sleazattle
N8 said:
Look at oil companies for example... they are reinvesting their money on a mad drilling spree... and other ventures.

Most corporations reinvest the money anyway. Sitting on cash makes no sense and few companies give dividends anywhere near their actual profits.
 

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
Housing Slowdown May Claim 800,000 Jobs
By ALEX VEIGA, AP Business Writer

LOS ANGELES - A sustained decline will hit the U.S. housing market next year, costing the nation as many as 800,000 jobs, according to a new economic report released Wednesday.

The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost, the quarterly Anderson Forecast predicted.

"We expect housing to start slowing the economy this quarter or the next," said Edward Leamer, director of the study done at the University of California, Los Angeles.

"Some jobs in manufacturing might well disappear as a result of weakness in housing, but this may be offset by jobs brought home or not lost to foreign competition," he wrote.

The forecast said eight of the last 10 economic recessions were started by housing market slowdowns. Though the coming cooldown will cause a drag on the nation's economy, it will fall short of triggering a recession, the forecast said.

The report cited several signs that the decline could be under way:

• New construction of housing in October was down 5.6 percent from the previous month, with new construction of single-family housing accounting for a 3.7 percent dip.

• New home sales have declined.

• Applications for home mortgages have trended downward since late September as rates increased.

• In some regions, homes are remaining unsold longer and the pace of housing construction is outpacing population growth, which could spell a decline in demand.​
"On all these grounds, we believe housing is due for a sustained decline," economist Michael Bazdarich wrote in the forecast. "The remaining questions are how hard the fall will be and when it will begin."

The forecast for California, where housing prices lead the nation and housing-related jobs have been driving economic growth, resembles the national outlook.

Economist Ryan Ratcliff said the state's housing market will see a slowdown in spending along with job losses in construction and related sectors.

He expects California home prices to plateau while sales and new construction see moderate decreases during two years of weak growth.

"If the housing market slows more than we are expecting, a recession is not out of the question," Ratcliff wrote.

Counties showing signs of a cooldown include San Francisco, where housing sales have been off 20 percent since peaking in June, 2004. San Diego County has seen sales slow about 13 percent, while monthly price gains have plummeted to low single digits.

California's job picture has been lackluster in recent months. The rate of employment growth has slowed after a significant number of jobs were added in July and August.

Construction has remained the fastest-growing sector. But Ratcliff predicts a slowdown in construction activity through 2007 and moderate construction job losses.
 

sanjuro

Tube Smuggler
Sep 13, 2004
17,411
0
SF
N8 said:
Housing Slowdown May Claim 800,000 Jobs
By ALEX VEIGA, AP Business Writer

LOS ANGELES - A sustained decline will hit the U.S. housing market next year, costing the nation as many as 800,000 jobs, according to a new economic report released Wednesday.
So you admit Bush is doing a horrible job?
 

N8 v2.0

Not the sharpest tool in the shed
Oct 18, 2002
11,007
149
The Cleft of Venus
sanjuro said:
So you admit Bush is doing a horrible job?

This doesn't have anything to do with Bush.

Construction is always ebbs and flows... Mostly the slow down is in areas where the market has been way over built an it's coming back to bite them.
 

fluff

Monkey Turbo
Sep 8, 2001
5,672
0
Feeling the lag
N8 said:
This doesn't have anything to do with Bush.

Construction is always ebbs and flows... Mostly the slow down is in areas where the market has been way over built an it's coming back to bite them.
Much like all other industries then. Economies ebb and flow, yet you give the credit for the flow to Bush and the responsibility for the ebb to Clinton or other causes. How convenient.