Partying, but it’s not 1997

Posted by Dan Barkin on December 31, 2013 

The headline on the AP story that appeared on The New York Times website New Year’s Eve read: “S.&P. Up 30% in Year in Biggest Increase Since 1997.”

The Standard & Poor’s 500 index rose 29.6 percent in 2013, which was its biggest gain since 1997. For the record, the Dow jumped 26.5 percent, and the Nasdaq climbed 38.3 percent.

In 1997, I was business editor here. The economy was going nuts. Unemployment in the Triangle was as low as 1.8 percent. Companies were complaining that they couldn’t find workers. Everyone had discovered the Internet, and dot-coms were starting up all over the place. That bubble would burst several years later, but in 1997 everyone was sure all the trees grew to the sky.

This has not been 1997. Locally, the latest unemployment numbers show a jobless rate of 6.4 percent. It’s better than during the recession but not good.

Skepticism abounds

Nationally, there is a lot of skepticism about the bull market on Wall Street. The economy has some signs of life, but this recovery has had all the excitement of a wet match. In the third quarter, it grew at a 4.1 percent annual rate, but that was goosed by inventory buildups. We’ve been stuck in a 2 percent growth rut for a while. After a near depression five years ago, you’d expect better, but better hasn’t come. And most economists are forecasting more of the same.

Bloomberg’s survey of 75 economists pegs economic growth in 2014 at 2.6 percent.

Yuck.

For 2015, these 75 soothsayers put GDP growth at 3 percent.

They also say the national unemployment rate will drop slightly from the current 7 percent in the coming year.

On a brighter note, they put the odds of a recession in the next year at 11 percent.

But when these folks are asked about the chances of a recession, they think like economists, and they have a very specific, technical concept of a recession. So they may say we’re not in a recession but the average Jane and Joe probably feel like we’ve been in one since 2008.

Some good signs

There are actually some good things to say about the state of the economy. Because of technological advances in drilling, we are seeing huge jumps in oil and natural gas production. This has the potential to make our manufacturing sector more competitive because energy cost is a major variable in manufacturing. So we are starting to see jobs that went overseas come back.

Housing has been making a comeback, and that has big consequences. Families whose homes have been underwater for years are starting to climb out of the ditch, and may actually have equity, for goodness sakes.

The surge in the stock markets has a wealth effect. If you had enough gumption four and five years ago – when the markets cratered – to keep from dumping your Amalgamated Consolidated Preferred and liquidating your 401(k), which may have turned into a 201(k), you have done very well indeed. The S&P 500 fell to 676 in March 2009. On Monday, it closed at 1,826. The Dow has added about 10,000 points since the depths of the bear market.

Congress and the Obama administration could help things by getting to an agreement that would remove periodic threats of default and establish certainty about federal tax and spending policies. The inability of Washington to agree on anything really meaningful in these areas has been a wet blanket over growth and the occasional debt crises scare the fool out of everyone. I’m not hopeful, because the Republicans think they’re going to run the table and take the Senate in 2014 and then the White House in 2016, and so they’ll just pass on any grand bargain.

Maybe they’re right, but if they can’t do a big deal, can Washington please just pull over onto the shoulder while the rest of us try to get this economy into a higher gear? Yeah, that would be great.

Dan Barkin is a senior editor at The News & Observer.

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