As Good as it Gets

April 15, 1998 · by Kerry Harding

Economists say that the title of Jack Nicholson's hit movie As Good as it Gets, aptly describes the current state of the U.S. economy. In spite of being the best performing economy in the world, the question continues to be "How Long Will It L

Economists say that the title of Jack Nicholson's hit movie As Good as it Gets, aptly describes the current state of the U.S. economy. In spite of being the best performing economy in the world, the question continues to be "How Long Will It Last?"

Experts from federal government and private think tanks concur that the seven-year-long expansion will continue but much more moderately. For next year, of the economists polled, 55% predict a baseline forecast of slower but continued growth; 25% predict a cyclical downturn and 20% predict higher growth than 1998. Why the pessimism? Output is close to capacity and the Federal Reserve should raise interest rates, resulting in a decline in residential construction, expensive household durable goods and automobile production.

Capital spending will continue to expand, driven by high utilization rates that justify expansion. Rapid advances in technology and businesses' greater acceptance of such changes also will spur spending. Gross investment in schools, prisons, roads, and water treatment and delivery systems is projected to increase by 4%, but employee raises in public service should only be about 1.5%--slightly higher than business spending. Investment in new structures should level off later in 1998 with spending for telecommunications facilities parking structures increasing and offices, industrial plants, new stores and hotels beginning to decline. Construction firms should see employment increase into 1999 with gradual cutbacks as large domestic corporate and government projects near completion. Regionally, growth with be strongest in the Mountain and Pacific Northwest regions and slowest in the Mid Atlantic due to tight labor markets' pressure on wages and benefits.

Can we anticipate the opportunities in future years? In Shifting Gears: Thriving in the New Economy, author Nuala Beck makes some astute observations regarding trends affecting the U.S. economy

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