Given the July employment report the first article talks about the general outlook going forward for GDP growth, inflation, and interest rates.
The second article talks about the contribution from the tech sector in helping us to emerge from last year’s recession, and the continuing contribution from tech as the economy continues to evolve. It is possible that a faster rate of growth in the tech sector will boost productivity growth in the quarters and years ahead and that, in turn, could quicken the rate of growth in our standard of living.
See what you think.
Stephen Slifer
NumberNomics
Charleston, S.C.
This begs the question, assuming an increase in productivity how will that play out concerning inflation.
It depends. (How is that for an economist’s response.
Currently, if potential growth is 1.8%, once we hit full employment and get my GDP growth rate of 8% this year, 5% next year we have a problem.
If we play the game differently and potential growth picks up to 2.4% we still have a problem.
Faster potential gives us a bit more wiggle room to get non-inflationary growth. The bottom line is, once we hit full employment right around the end of this year, productivity can allow us to grow a bit more quickly but i suspect we exceed the speed limit no matter what happens.
Best.
Steve
The boom in IT spending is not necessarily growth. Some companies are seeing a ramp up for data storage as workers are remote and there may be a more obvious need for centralized storage. Yes companies are buying but to say it is growth is a big stretch. IT almost always does well in bull or bear markets. I’d say there are better economic indicators to look at and that a better conversation is over whether this inflation is transitory like the Fed and other institutions are gambling big that it is. Time will tell. I am of the opposite opinion that this inflation will not end well and is just another rollercoaster effect. Maybe a Laffer curve?
Hi Ty,
Thanks for sharing your thoughts. I guess I was trying to highlight the fact that tech has been instrumental is getting us out of last year’s recession. The rapid development of the vaccine was instrumental in getting us out of the recession. Without it we would likely still be mired in recession. Tech clearly helped to produce GDP growth far more quickly than we would have been able to do so without it. Same thing with helping business cope with this work-from-home concept. Tech helped them develop better ways for the head office to communicate with both employees and customers. In the end they have been able to produce more goods and services with fewer bodies than they did previously. That, to me, is growth. There are tons of other examples. A friend deals with pressed lumber used in the construction of every home. His territory is the Northeast. Used to have to drive to every city, go to the housing office where they issue building permits and get the name of every project and every developer. By doing so he was able to develop his list of potential customers. During the recession housing offices put all that stuff up on line. Now he can do the same thing without have to spend a week driving around from place to place. Clearly, far more efficient.
Regarding inflation, I have written about this several times. I am not of the camp that believes this is a temporary phenomenon. For what it is worth, I am looking for the core CPI to rise 5.3% this year and 3.7% in 2022. The Fed expects 3.0% this year but then dropping back to target at 2.1% in 2022. I don’t buy it, and the primary reason I do not think that will be the case is because of rapid growth in the money supply. You can read some of my earlier articles on this topic on the website.
Steve