NCPA - National Center for Policy Analysis

Signs Of A Weaker Economy

January 2, 2001

The only accomplishment Bill Clinton can claim is a generally good economy, says Bruce Bartlett. Now even that is in jeopardy.

The economic data shows growing economic weakness:

  • For example, the Index of Leading Indicators, the federal government's main forecasting measure, has fallen in 6 of 11 months through November, with only 3 months in positive territory.
  • Consumer confidence -- one of the key elements of the leading indicators -- has fallen from a level of 144.7 to 133.5 in November.

A compendium of recent economic data issued by Congress's Joint Economic Committee on December 15 shows current economic conditions as well as forward-looking data have been pointing toward a slowdown for some time.

These include:

  • High interest rates. The Federal Reserve has raised short-term rates 6 times since June 1999, putting the rate that banks charge each other at 6.5 percent.
  • Rising energy prices. Oil and natural gas prices have risen sharply over the last year, leaving consumers with less money to spend or invest.
  • Falling stock market. All the major indexes are down, especially the technology-heavy NASDAQ. Lower stock prices reduce financial wealth, which also reduces consumer spending and raises the cost of capital, which causes investment to fall.
  • Employment growth slowing. Since mid-year, private employment has grown by just 122,000 jobs per month, compared with 202,000 in 1999.

Americans have become far less optimistic about the economy. According to the Gallup Poll:

  • In January 2000, Gallup found that 69 percent of Americans thought things were getting better and only 23 percent thought they were getting worse.
  • By early December, just 39 percent thought things were getting better, while 48 percent think they're getting worse.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, January 1, 2001.


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