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Tea Leaf: ABCs of the American economy

Published: Thursday, Nov. 25 2010 12:33 a.m. MST

In this Nov. 4 photo, a job openings board is seen at a career solutions center in Metairie, La.

Associated Press

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SALT LAKE CITY — This week's Tea Leaf is our semiannual alphabetic view of the U.S. economy. Global ABCs will soon follow.

America — Prospects for solid economic growth are still limited, but getting the midterm elections out of the way helps reduce uncertainty. Any political moves toward cooperation would really help.

Budget deficits — Averaging $1,350,000,000,000 each of the past two years … a little less this year. Projected at $1 trillion annually in coming years, which is simply unaffordable. Hold your breath for 25 seconds … the deficit just increased by more than $1 million.

Consumer Confidence — Still fragile, with near double-digit unemployment and soft home values. Expected to rise modestly in coming months as better employment news (hopefully) unfolds.

Dollar — Has actually strengthened a bit in recent weeks, especially versus the euro, tied to rising anxiety about Irish and southern European national (sovereign) debt levels.

Energy — Greater use of abundant natural gas, better access to oil and gas in Alaska, greater use of nuclear power and further progress in "clean burn" coal technology must be part of the equation in coming years … in addition to alternative sources.

Federal Reserve — Its key short-term interest rate has been at a historic low of 0.00 percent to 0.25 percent for nearly two years, with no change expected anytime soon. The jury is still out as to the advisability and effectiveness of QE2.

Global economy — Emerged from its first post-WWII recession late last year. Global growth is expected to weaken a bit in 2011 as Europe stumbles and China intentionally slows.

Housing — Many forecasts have average U.S. home prices sliding a bit more before stabilizing next summer. However, bargain-priced properties are drawing multiple offers in many communities.

Inflation — Financial markets remain split as to whether inflation or deflation will be the fly in the ointment in coming years. Core (excluding food and energy) consumer prices rose 0.6 percent during the past year, the smallest 12-month rise in more than 50 years.

Jobs — Less political uncertainty and prospects of slightly better U.S. economic growth could lead to modestly stronger jobs gains in coming months … let's hope so.

Knowledge, and the ability to think — The key to individual success in an increasingly sophisticated economy. Ongoing education and training are now lifelong realities for many to be successful. Average annual earnings of a college graduate versus a high school graduate today? Eighty percent to 90 percent higher.

Lending — Still too tight across the U.S., especially by the nation's largest handful of banks. At the same time, tens of thousands of small and medium-size businesses are not interested in borrowing, preferring to keep things close to the vest.

Mortgage rates — Actually rose by roughly one-quarter percent over the past 10 days. Note: If your financial ducks line up, NOW is a great time to refinance an existing mortgage or finance a new or foreclosed property.

National debt — The gross national debt (yes it is gross!) of nearly $14,000,000,000,000, combined with deficits now exceeding $1 trillion annually, makes concrete moves toward fiscal sanity mandatory in the nation's capital.

Obama — Which path to take, given the "hammering" from the November 2 elections … the far left, or more centrist?

Politics — Childish and boorish behavior on both sides of the aisle in Washington is ridiculous, and all too typical. Is cooperation really that difficult?

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