Tea Leaf: The ABCs of the U.S. economy

Published: Tuesday, Dec. 13 2011 1:00 p.m. MST

In this Nov. 23, 2010 file photo, a woman looks at a DKNY holiday window display, in New York. Retail spending is expected to rise 3.0%-5.0% versus last year.

Mark Lennihan, File, Associated Press

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This week's Tea Leaf is our semi-annual alphabetic view of the U.S. economy. Global ABCs will soon follow …

America — Economic growth is likely to continue at just better than a snail's pace, especially when considering the massive amounts of fiscal and monetary stimulus in the economy. Still, the U.S. economy, for the moment, is improving while Europe, China, and much of the world slows.

Budget Deficits — I'm old enough to remember President Gerald Ford holding a news conference in the mid-1970s. He used a pointer and a large chart to explain why the nation might run a budget deficit as high as $40 billion that year. We now do that every 11 days.

Consumer Confidence — Still fragile with high unemployment, soft home values, and anxiety about the size and direction of government. A "recession of confidence" remains front and center.

Dollar — Holding its own as the euro slides.

Energy — Greater use of abundant natural gas, better access to oil and gas in Alaska and the Gulf of Mexico, and major 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 an historic low of 0.00%-0.25% for three years now, with no change expected anytime soon. Will the Fed be able to rein in extraordinary money growth when necessary in coming years?

Global Economy — It's all about Europe these days as more euro nations feel the wrath of wary financing markets. You would think the U.S. might just take a hint as to what might be coming on this side of the pond if we don't get our financial house in order.

Housing — Home prices are expected to stabilize by 2012's second quarter. Note: I think economists have now said this for three years in a row. Maybe we will get it right this time.

Inflation — Financial market players are split as to whether inflation or deflation will be the major worry in coming years.

Jobs — A key to strong job growth in 2012? How 'bout the Administration and the Congress make some grown-up decisions about reducing future budget deficits … and then get out of the way.

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? … 70%-80% higher.

Lending — Still too tight across the U.S., especially by the nation's largest handful of banks. In addition, smaller banks and other lenders are struggling with the as-yet-mostly-undefined complexities of the Dodd-Frank financial legislation.

Manufacturing — Don't be surprised if rapidly rising global costs and more competitive U.S. costs lead to a renaissance in U.S. manufacturing activity in coming years.

National Debt — The gross national debt (quite descriptive actually) now exceeding $15,100,000,000,000, combined with budget deficits exceeding $1 trillion annually, makes concrete moves toward fiscal sanity mandatory in the nation's capital.

Opportunity — Challenge breeds (it just might be a good time to be aggressive).

Politics — Childish and boorish behavior on both sides of the aisle in Washington is ridiculous … and all too typical. Can we move toward term limits?

Quarterly Economic Growth — Most forecasting economists see a 1.5%-2.5% real (after inflation) annual growth pace in 2012. The current quarter could be closer to a 2.5%-3.0% real annual rate.

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