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Location: Nashville, Tennessee, United States

10/30/2003

Economic Boom!
It's official - the U.S. economy is booming now like it never did in the Clinton years. In fact, it's booming now like it hasn't since 1984, the year voters overwhelmingly re-elected a tax-cutting president in a 49-state landslide.

The U.S. economy "grew at a scorching 7.2 percent annual rate in the third quarter in the strongest pace in nearly two decades," reports the Associated Press.

Consumers spent with abandon and businesses ramped up investment, compelling new evidence of an economic resurgence. The increase in gross domestic product, the broadest measure of the economy's performance, in the July-September quarter was more than double the 3.3 percent rate registered in the second quarter, the Commerce Department reported Thursday. The 7.2 percent pace marked the best showing since the first quarter of 1984. It exceeded analysts' forecasts for a 6 percent growth rate for third-quarter GDP, which measures the value of all goods and services produced within the United States.
I BLAME THE BUSH TAX CUTS!!!

I can't imagine there is any celebration in the campaign headquarters of anyone running for the Democratic Party nomination for president.

UPDATE: I checked some of the Democratic candidates' websites and official blogs and there is - gasp - no acknowledgment or discussion of the fantastic economic growth report. Why, it's almost as if they are ignoring the good news and wishing it would go away.

UPDATE: Yes, but where are the jobs? They're coming.
A report by the Labor Department on Thursday showed the number of Americans filing initial jobless claims fell 5,000 last week to 386,000 - the fourth straight week that claims were below the 400,000 mark, which economists consider a divide between an improving or deteriorating U.S. job market. "It is nearly impossible to believe that the economy is not setting itself up for a break to the upside on job creation sometime during the first quarter of 2004," said Anthony Chan, chief economist at Bank One Investment Advisors.
UPDATE: Bubba doubts the good economic good news and thinks the 7.2% GDP growth stat might be a Bush lie. But, then, he also thinks there is a housing bubble. Got news fer ya, Bubba, there is no housing bubble. And all you had to do to know that, Bubba, was read my blog every day.

There's more on the non-existent housing bubble here from Susan Trimbath, a senior research economist at the Milken Institute and author of A New Kind of Gold? Investment in Housing in Times of Economic Uncertainty. Here's an excerpt:
This new business model - building homes only after they have been sold - has dramatically changed the financial performance of large development firms by dramatically lowering the risk of carrying an inventory of completed homes and by stabilizing earnings predictability.

Consider, for example, Pulte Homes, one of the largest builders of single-family detached homes in the United States. In 1991, Pulte had an operating profit margin of 4.5% and a return on assets of 1.07%. By 2002, Pulte had more than doubled its operating margin to 9.59% and raised the return on assets to 7.2%. Pulte's debt-to-assets ratio dropped from 83.6 to 35.9 during the same years.

The "build-to-order" model has changed the financial patterns for the home construction industry in ways that now set it apart "from many other types of industries," says F. Patterson Schiewitz, head of national homebuilding at Bank One in Chicago. Unfortunately, few people outside the industry have recognized this transformation, and that has resulted in underpriced securities, underrated credits, continued difficulties in home builders' getting financing and even speculation about a national "bubble" in housing.
The Trimbath publication I mentioned above can be gotten here for $10 in printed form or here for free in a downloadable PDF if you have registered (for free) at the Milken Institute's website. It's good reading.

UPDATE: Here's an interesting nugget about technology's share of the GDP:
Wesbury also points to higher-than-expected retail sales, which rose at an annualized 12.1 percent in June, July and August. And "high-tech spending and investment is once again leading the economy," Wesbury says. "We now see high-tech as a share of GDP [gross domestic product] at a higher level than it was back in 2000, so we're above the so-called bubble peak."

What Wesbury is referring to is the category in the U.S. Commerce Department's reporting of GDP called 'information-processing equipment and software,' which peaked at 6.4 percent of GDP in 2000, slumped to 5.7 percent during the recession, and now is at 6.5 percent. Wesbury says this is important because "that's the real driver of our economy, the entrepreneurial, innovative, creative side of things." He notes that new orders for computers and electronic products also jumped at a 38.4 percent annualized rate in June and July.
Wesbury, incidentally, is Brian Wesbury, chief economist of Griffin, Kubik, Stephens and Thompson, a brokerage firm in Chicago and formerly chief economist for the Joint Economic Committee of Congress, or JEC, in the mid-1990s.

Bottom line - the election is just over a year away, and the economy is growing again at a strong pace. Democrats hoping to sail into the White House on a river of economic discontent are going to have to find another stream to paddle in.