Date of this Version
Business in Nebraska vol. 67, no. 705
AN UNDERACHEIVING ECONOMY
A number of positive developments point to the potential for strong economic growth in the United States in 2013 and beyond. First and foremost, the nascent recovery in the housing sector is driving growth in construction sector employment. Durable goods purchases by households also are rebounding. This rebound is linked to faster rates of household formation and the continued recovery of automobile sales. Further, steady employment growth and recent improvements in hourly wages are supporting a modest expansion in consumer spending. A recovery in revenues is also allowing for a modest expansion of state and local government employment. Finally, an easing of the European debt crisis and re-acceleration of the Chinese economy should encourage renewed growth in exports and business investment over the next few years.
These positive factors point to strong growth in the United States economy. Yet, the U.S. economy is likely to disappoint, generating moderate recovery and a slow decline in unemployment rather than rapid economy growth. The reason is that federal policy-makers face too daunting of a task: the need to make difficult cuts in federal spending, and to make them at a gradual, unpopular pace. More precisely, there is a great need to address the budget deficit, but cuts in spending need to be gradual. The U.S. economy can withstand planned cuts in discretionary spending in 2013 but larger cuts in 2013 would be detrimental to growth. As a result, annual deficits will need to remain elevated.
Construction and Mining
Transportation and Utilities
Nonfarm Personal Income
Net Taxable Retail Sales