The Shape of a Recovery in the Making

Signs of recovery abound. The question troubling economists and politicians facing the 2004 elections is: Will the economy and job market improve fast enough to prevent consumers from tightening their purse strings?

GDP grew by an 8.2% annual rate in the third quarter of 2003, the fastest in nearly two decades. Growth in the Q4 is expected to register 4.5%. Defense spending and solid consumption have more than offset the trade deficit’s persistent drag. Renewed business confidence and improved business investment will lift 2004 growth to 4% or 5%. In addition, the longest stretch of joblessness since WW II is over, thanks to the combination of a profit recovery and the resumption of business investment.