Click on the banner to learn more...
Wyss tells TVB the recovery looks real
Providing the economic big picture at this week's Television Bureau of Advertising (TVB) Forecast Conference, Standard & Poor's Chief Economist David Wyss said things are looking good after a couple of soft years. But he also warned that there's still a danger of other countries pulling the US back into recession.
"Up until the beginning of this year, although we had been allegedly in a recovery, it didn't feel like a recovery to most Americans, basically because we weren't seeing any job growth. The job growth is finally beginning to materialize - - not as fast as we would like it to, but we're finally adding some jobs. People are being added to the payrolls," Wyss said. "The unemployment rate is now back down to 5.4%. That's well below the historical average of 5.6%."
On the interest rate side of things, Wyss offered the opinion that the Federal Reserve is trying to get back to "neutral" after trying to give the economy a boost with extremely low interest rates. "My guess is that neutral is 4%," the economist said, but we won't get there quickly. He expects to see the Fed slowly push the Fed Funds rate up a quarter point at a time over the next couple of years until it finds that "neutral" point. And while 4% is well above the current 1.5% (and just a few months ago 1%), "this is still a very low rate by historical standards," Wyss noted.
What could go wrong? Wyss said his biggest concern is the trade gap, with the US continuing to spend much more on imported goods than it is receiving from exports. That gap would normally be dealt with by weakening the value of the dollar to make imports more expensive and exports cheaper. But with the economies of Japan and European countries lagging US growth, those major industrial countries (Japan in particular) are using their central banks to try to keep the dollar strong and boost their own exports. "There's a risk that instead of us pulling the other countries out of recession, they could pull us back in," Wyss warned.
|