Will the Goldilocks Economy Endure US Financial and Product Market Outlook

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Leading Indicators of Business Activity

• Consumer sentiment
• NAPM Survey
• Labor Market conditions

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The Facts about Productivity
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The Facts about Productivity
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The Facts about Productivity

• Productivity is very cyclical
• Productivity slowdown 1973-1995
• Improvement is very recent 1995-2000
• Part of the recent increase was cyclical

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Role of Technology
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• A New Economy?
• You can see the computer everywhere but in the
  productivity statistics. (R. Solow)
• Whats different now?
• What are the economic implications of the
  Internet?

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Have there been technological changes?

• The computer
• but that has been around for a while
• on the other hand technical revolutions take a
  long time
• The PC
• The network

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How has the Internet affected business?

• Hardware--most of the gain has been there
• Electronics and communications
• Dot-coms
• Old economy manufacturing
• B2B, Supply Chain, Exchanges
• B2C,e-tailing
• Financial markets
• Other

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Role of Globalization

• Trade Balance and composition of trade
• Foreign services, Indian Call centers
• Impact on Labor Market
• Impact on Inflation

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What Happened to Financial Markets
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What Goes Up Must Come Down
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How will the economy be affected because the
bubble burst?

• Consumer demand
• Investment demand
• Financial markets and banks

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Forecasts--What Lies Ahead for Financial Markets

• Debate
• Class Discussion and vote The Dow at end 2000?
• The
  Nasdaq at end 2000?

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Forecasts--What Lies Ahead for the US Economy

• V shaped
• U shaped
• Banana Shaped
• L shaped

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The CEA Forecast

• 1999
  2000 2001 2002 2003 2004 percent
  change, fourth quarter to fourth
  quarter Nominal GDP 6.5 6.7 5.3 5.4 5.4 5.
  4 Real GDP 5.0 4.1 3.2 3.2 3.2 3.2
  GDP Price Deflator 1.6 2.4 2.0
  2.1 2.1 2.1 Cons.er Price Index 3.4 2.5 2.6 2.7
  2.7 27 calendar year average
  Unemployment () 4.2 4..0 4..1 4.4
  4.6 4.7 Interest Rate
  Tbills 4.7 5.9 6.0 5.7 5.4
  5.3 Interest 10yr Tnotes
  5.6 6.1 5.8 5.8 5.8
  5.8

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Wheres the Recession?
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What are the issues

• Positives?
• Negatives?
• DebateA
• Are We heading for a Recession?
• A short one or a long one?
• Group 3 Arguments for Optimism
• Group 4- Arguments for Pessimism
• WEFA recession scenario
• Handout p21-24

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Oil, Electricity, and Natural Gas

• Threats to economic expansion
• Potentials for inflation

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Policy Debates--Pro and Con

• Fiscal Policy
• Is it a good time for a tax cut? What kind?
• Pro Group 5
• Con Group 6
• Monetary Policy
• Is it a good time for more interest rate cuts?
• Pro Group 7
• Con Group 8

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International considerations
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The World Economy
World Business Cycle
US
UK
Germany
France
Japan
E Asia
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Implications for Business

• Optimism
• Pessimism

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Discussion

• What industries are likely to offer the best
  opportunities?
• In the next two years?
• In the next five years?

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The End

• papers are due on May 1 E mail them as Word
  attachments toltF.Adams_at_neu.edugt