National Economy Weathers Hurricane Season, Analyst Says
December 7, 2005
CHICAGO - The U.S. economy is "solid", despite fall hurricanes that briefly raised energy prices, an economist with the Chicago Federal Reserve Bank told state legislators and legislative staff on Wednesday at the National Conference of State Legislatures' Fall Forum.
"Some people have referred to this as the Rodney Dangerfield economy. It doesn't get any respect," said William Strauss, senior economist and economic advisor at the Federal Reserve Bank of Chicago. "In general, the economy is doing quite well."
The hurricanes were not particularly devastating to the U.S. economy, Strauss said, though they had tragic human impacts on the Gulf States. The economy has expanded during the past four years. And in 2005, it grew about 3.2 percent, which is within the healthy range of 3 percent to 3.5 percent. Employment increased by nearly 2 million jobs during the past year, averaging 166,300 jobs per month. Productivity growth has been steady. And corporate profits have grown since the first quarter of 2002.
Though gas prices rose to $3-a-gallon in many places, Strauss said we're spending less of our income on energy now than we were decades ago. "People say they wish we could go back to the glory days of the '60s when gas was 30 cents per gallon," Strauss said. In the 60s, Americans spent almost 7 cents per dollar on energy. Today, it's at about 5 cents per dollar.
And even though gas prices have risen recently, sales have kept pace. "If this is such a terrible thing to have $3-a-gallon gas, we should have seen lower consumption," Strauss said. "While we'd all like to pay less for gas, it wasn't enough to change our habits."
Adjusted for inflation, Strauss continued, current $55-a-barrel oil prices are lower than they were in the early 1980s, when they peaked at more than $90 a barrel in 2004 dollars.
Strauss said he expects positive economic trends to continue into next year. He predicts full employment in 2006. "It wouldn't surprise me if by the middle of next year, we're having firms saying they're having a hard time finding qualified workers," he said.
He pointed to some indicators that aren't so rosy, though. Wage growth has not increased with employment. The U.S. trade deficit remains a problem. And this healthy national picture is not showing itself everywhere. Louisiana, Mississippi and Michigan, for example, are three states with faltering economies, Strauss said.
"There are regional economies that are different," said Michael O'Keefe, fiscal advisor to the Rhode Island House. His office recently lowered revenue forecasts in that state, and he attributes that to lower-than-expected gambling dollars. "It appears that revenues are coming in lower than we expected," O'Keefe said. "That leads us to believe a lot of money that would have gone into gaming terminals went into gas tanks."
NCSL will release a new state fiscal report next week. Indeed, though the national forecast is pleasant, states' cups are not necessarily overflowing. "He put a lot of data on the screen that may or may not relate to patterns in tax receipts, or they may not drive tax receipts contemporaneously," explained Michael Calvert, a legislative fiscal analyst in Nebraska.
NCSL is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
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