In 2007, the American Economy Revives While the Global Boom Accelerates

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In 2007, the American Economy Revives While the Global Boom Accelerates

Some self-styled experts are forecasting a weak economy in 2007, and some even expect a recession. Don’t believe it!

Strong productivity gains, low global interest rates, and continuing realization of the benefits of globalization will lead to a booming global economy. The bull market in stocks and strong corporate earnings will continue in 2007. In the first half, the U.S. economy can be expected to lag global growth, but it will accelerate in the second half.

How do we know? Because we’ve examined the specifics within the broader context of pervasive trends. Unfortunately, by subjectively interpreting short-term trends, many so-called experts get a highly skewed idea of what the economy is doing at any given time. But by looking at all the important data together — and especially how it all interacts — a clear idea of the trends begins to emerge. Right now — and into the foreseeable future — the trends can be summed up in a few words: low taxes, low inflation, high profits, and full employment.

Let’s start with employment and taxes. Retailers, healthcare providers, and financial services companies, as well as professional and business services firms, are all in a hiring mode. In fact, we can see strength almost everywhere we look. Non-farm payrolls grew by 167,000 in December 2006, far outstripping the predictions, which were in the range of 100,000.

Meanwhile, the numbers for October and November were revised upward by a total of 29,000 jobs. This means that even while the U.S. labor force is growing rapidly, the rate of unemployment remains very low.

Moreover, those who are looking for jobs find them faster than in the past. On average, it took only 7.3 weeks to find work, the fastest turnaround for the unemployed in five years. The past year saw nearly 2 million new jobs created, according to the Labor Department’slatest statistics.1 And the household survey, which measures the number of people working, shows that figure to be closer to 3 million. Since the tax cuts went into effect in 2003, we’ve seen 7.4 million jobs added to the corporate payrolls, and total employment has increased by 8.6 million.

With unemployment at 4.5 percent, we are enjoying what amounts to full employment, with that jobless figure representing an all-time low. The 4.2 percent wage increase that American workers enjoyed in 2006 is the highest since 1983, when wages grew 4.5 percent in one 12-month period.

The obvious outgrowth of this situation is that people are making more money on an individual and an economy-wide level...

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