“Recession Continues to Ravage State Budgets”
“Airline Industry Still Weak”
“Smaller Pay Raises Expected as Economic Slump Persists”
“U.S. Industry Now Operating at Only About 2/3 of Capacity – A Fact that Bodes Ill for Capital Goods Industries”
What is not immediately clear is that this is all old news. These headlines appeared in the January 1983 editions of the Wall Street Journal – thirty years ago! The gloomy New Year headlines were followed by periods of moderate-to-strong economic growth and large growth in the broader stock markets.
While the October 2013 s government shutdown may feel like a once-in-a-lifetime, event it is not. The U.S. government has shut down with quite some regularity. The most recent such instance came in December 1995, when a standoff between President Clinton and the House Republicans “shut down” the government for a record 21 days. But consider the following facts:
- Since 1976, the government has shut down a total of 18 times. On average, stock markets declined 0.6% over the course of a shutdown.
- Many of the shutdowns in America — seven out of the past 18 — begin as budget disputes, and accordingly begin on Oct. 1 of a given year.
- The second most popular reason for shutting down the government is a dispute over defense spending, which happened five times — all during the Reagan administration.
- President Bush “43,” was the only president since President Ford to suffer no government shutdown at all during his administration.
- Shutdowns under Democratic presidents, however, tend to last longer than those under Republican presidents. President Carter’s administration was offline for 57 days total, and President Clinton’s by 26 days. President Reagan, in contrast, despite having the most shutdowns, was actually only “closed” a total of 14 days. (Source Dailyfinance.com)
As we get closer to the November elections and the debate in Washington over budgets continues the political noise is increasing. Clearly there is a disconnect between many of the sound bites given by political candidates and the facts. At the very least the information is misleading and in many cases it is simply incorrect. The bottom line? The economy remains strong. Inflation, interest rates and unemployment remain low by historical standards while productivity is increasing. This is not to say that everyone is better off or that things will remain as they are – but the headlines and commentary my not reflect some of the pertinent facts. Nor are they anything new!
The manufacturing sector is now growing at the fastest rate in two decades, but no one mentions this. In addition, the service sector that accounts for about 85% of employment is growing at a near record clip. What this all means is that the economy is headed for its best year in two decades. Moreover, corporate profits will likely set a new record in 2014.
What about jobs overseas? US Gross Domestic Product share of the world economy has continued to grow over the last century. The United States is first in the world in terms of GDP per person – generating more than twenty percent of the world’s total output with just five percent of the population (source CIA Factbook).
Finally, we are a leader in new technology for both consumers and industry. Additive manufacturing—the industrial version of 3-D printing—is already used to make some niche items, such as medical implants, and to produce plastic prototypes for engineers and designers. Advanced robotics and nano technologies continue to create efficiencies for which we are the worldwide leader.
Despite hype about deficits, terrorism, etc. we live in a free society that is the envy of the world today. You do not hear about the “Swiss Dream, “French Dream”, or any other nationalities dream. It is the “American Dream” where people can live freely and for the most part prosper to any extent they wish through hard work and persistence. We have become the envy of, and a model for the rest of the world.
As always pleases contact us with questions, concerns or if we can otherwise be of service. We understand that these may be unsettling times but are here for you.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Randy Carver and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.