Surveys have found that consumer confidence went up in August as consumers are beginning to believe that the US economy is poised for a recovery.
"The welcome bounce back in confidence this month was entirely due to consumers’ optimism about the future," said Lynn Franco, director of the group’s consumer research center. "However, continued optimism will depend on positive developments in the labor market."
Consumers showed growing optimism about the economy over the next six months, though their assessment of current conditions again deteriorated slightly. The Conference Board’s expectations index rose to 94.4 in August from 86.3 in July, while the present situation index declined to 61.6 from 63.0.
The next big hurdle the economy needs to surpass is the labor situation. Labor is always a lagging indicator, meaning that if we’re in a strong recovery, it may be as long as six months before we start seeing an uptick in new job creation. However, since the ecomomy has been engaging in a slow "jobless" recovery for some time now, it’s possible that the uptick in hiring will be more gradual than sudden.
Regardless of the shape of the recovery, any economic uptick is welcome news for the nation. The economy has been in the doldrums for nearly 2 years now, battered first by a post-inflationary downturn, then the September 11 attacks, then anthrax, then corporate scandals, then concerns over the war in Iraq. The economy is finally adapting to the status quo, and if consumers are feeling upbeat that means that the psychological barriers to economic recovery are beginning to come down.
The “economic recovery,” now in its third year, is set on a bed of quicksand as badly as it was on September 11, 2001, if not more so. The 2004 federal budget is very likely to be a record 7% of GDP, meaning that the government will be borrowing in unprecedented numbers, interest rates will soar, and less capital will be available for your beloved small businesses to invest in expansion of their operations.
Furthermore, it’s almost a certainty that the instability in Iraq will continue to some degree, and the fear of terrorism around the corner will probably leave investors wary. Even if terrorism fears are unfounded and the situation in Iraq settles down in the coming months, the billion-dollar-a-week cost of occupation will most likely be an economic strain…and the military draft is very likely to be reinstituted in the next year, which I don’t anticipate will be good for consumer confidence considering most people only support putting Americans in the line of fire when it’s other people’s kids.
I don’t anticipate that the jobless recovery is likely to become a job-producing recovery anytime soon either. The biggest obstacles to domestic job growth are the trade agreements that make investing in foreign labor vastly more profitable than investing in domestic labor, and the soaring costs of health care which shows no signs of going away and is stifling the growth of good jobs and will likely continue doing so.
I want ot know, in what situation the interest rate of the nited States could go up?
Only if there was a problem with inflation popping up sometime in the future – which isn’t really the problem. Interest rates may go up slightly as the economy recovers, but unless we get into another bubble like we did in the 1990s rates will probably remain rather low.