At Last, Good Economic News

Tax cuts, resumption of business investment, and strengthening confidence combined to generate a surge in U.S. economic growth during the third quarter of 2003. Real Gross Domestic Product (adjusted for inflation) surged at a 7.2% annual rate, the biggest quarterly increase since the first quarter of 1984. Real disposable personal income also grew at a 7.2% annual rate, after increasing just 1.8% in the previous 3 quarters. Even the employment picture brightened as new jobless claims fell sharply in late October to their lowest level since early 2001. Productivity surged at an 8.1% annual rate in the third quarter. Put another way, employers are able to get as much work out of 953 workers now as they got out of 1,000 workers a year ago. While positive over the long term, this has contributed to anemic hiring over the past two and a half years.

A recent survey of professional business economists conducted by the National Association for Business Economics (NABE) provides some perspective on these numbers. The survey conducted between October 2nd and October 16th of this year and the results reflect the responses of 110 NABE members. Commenting on the overall trends, NABE President Duncan Meldrum (chief economist for Air Products) said "Demand expanded [in the third quarter] at the highest rate since the fourth quarter of 1999 and in all industry sectors, something we haven't seen in a long time. Profits also expanded across all sectors, and capital spending was modestly positive for the second quarter in a row. But, employment is still contracting at NABE firms, although at a slower rate. The good news for employment is that expectations for future hiring are slightly brighter for all industries except goods-producers." Highlights of the survey are available online at www.nabe.com.