Economic positives outweigh the negatives

Monday, April 1, 2002

No one -- not even Federal Reserve Board chairman Alan Greenspan -- wants to say for sure that the recession that sneaked up on us last year is going away or is already gone.

Nor does anyone want to forecast the extent of what appears to be a solid economic recovery.

But just as there are signs of spring everywhere, there are signs of economic strength and growth all around us.

This is good news.

And it is not so good news.

Here are items that can be put in the good-news column:

There are more jobs. February's report showed the nation's unemployment rate dropped to 5.5 percent thanks to the addition of 66,000 jobs.

There is stronger-than-anticipated consumer confidence. This is a crucial indicator, because consumer confidence usually means more consumer spending. And consumer spending is responsible for two-thirds of all the economic activity in the United States.

Interest rates may start climbing again. This would be good news to lenders and to investors who depend on interest income, particularly retired Americans who saw the bottom fall out of their earnings on interest-bearing investments last year as the Fed chopped key rates again and again to thwart inflation.

Orders for big-ticket items rose for the third consecutive month in March, meaning more consumer spending and more jobs.

In spite of the economic gyrations, the much-watched Consumer Price Index has remained relatively low. Over the past 12 months, the CPI has risen by only 1.1 percent. This is its lowest increase in 38 years.

Meanwhile, the stock market enjoyed a healthy surge in early March. The Dow Jones Industrial Average managed to stay well about the 10,000 mark throughout the month.

Here are the items that can be put in the not-so-good-news column:

With consumer confidence and a resurgence in buying, prices are going up for clothing, airline tickets, gasoline, energy, medical care and prescriptions.

Even without any interest-rate tinkering by the Fed, mortgage rates are going up.

Higher interest rates also could mean more expensive loans for consumer items like automobiles and appliances. One economist is predicting that the federal-funds rate could climb from its 40-year low of 1.75 percent to 5 percent over the next year.

Obviously, any number of factors could shove the economy up or down in short order. But the trends for now show a return to growth and strength. This should be considered good news by just about everyone.

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