Original URL: http://www.theregister.co.uk/2005/04/06/sun_us_economy/
US still in midst of hi-tech powered super boom - pundit
Productive in cheap clothes
It's tough to quantify and even harder to prove. But, optimists rejoice, the US economy is still booming. Investors can feel this even if they can't explain it.
That's the rather visceral take on US business handed out today by Jim Glassman, a managing director and top strategist at JP Morgan Chase. Glassman, speaking in Chicago at an event sponsored by Sun Microsystems, told attendees to ignore rising oil prices, a weak dollar, the "jobless recovery" and inflation fears. All is well, and we have technology to thank for it.
"We are in the middle of something very big," Glassman said.
The US economy is steadily pulling out of the do-com bust and heading toward a protracted boom, Glassman said. As evidence, the pundit noted that the US economy has proven far more resilient and diversified than the economies of Japan and Europe. US companies' after tax profits "have never been better," the US workforce is more productive than ever and the GDP is growing steadily. Meanwhile, Europe and Japan remain largely flat in this post tech-bubble, post 9/11 world.
"It is the investment in technology that is driving this productivity," Glassman said.
The US has managed to turn East Asia in the "51st state" with Asian companies producing our goods. Glassman expects this outsourcing and offshoring to increase and insists both practices will benefit the US economy in the long run. Throwing business to China and India will only create larger markets for US goods, while also helping keep inflation low here by keeping the costs of products down.
There is, however, a downside to all this productivity and outsourcing.
"The economy may be doing fine, but it doesn't feel that great," Glassman said.
While the government reports an unemployment rate of 5.25 per cent, the real number of unemployed could stretch up near 7.5 per cent if you count a class of scared students, Glassman said. As many as three million people went back to school in 2001 and 2002 when they could not find jobs.
"There is a huge army of people out there who for reasons we can understand chose not to go into the job market," Glassman said.
But the unemployment level didn't faze the economist at all as he continued to marvel at this undocumented surge in US productivity. The US has managed to outperform its peers and looks set to buy stuff on the cheap for decades to come.
"Other countries are using their access to the US economy to drive their economy," Glassman said, adding that it will take a country like China 40 years to match the US economy in scale. So, let's live it up in the next four decades.
While the press dwells on a weak dollar and lack of jobs, investors see past this gloom and realize the boom that is at hand, he argues. This is evidenced by securities that are quite high in relation to their earnings.
"I think what the market is telling you is that investors, even if they don't know (what's going on), they can feel it," Glassman said.
And, damn, it feels good. ®