- House and Senate negotiators reach two-year budget deal
- Congress seeks ban on in-flight calls
- Michelle Malkin’s Twitchy site sold to owners of Townhall, HotAir: report
- GM’s Barra to be first woman to run top American carmaker
- China: Poisonous smog is a military asset, if you think about it
- Texas woman admits to sending ricin to Obama
- Ron Paul on son Rand: ‘I think he probably will’ run for president
- Cold War heats up again in the Arctic: Russian airfield reactivated after 20 years
- 6-year-old boy suspended for sexual harassment over kiss
- Voters deciding Mass. congressional contest
Growth spurt expected to slow this year
The savings rate ticked up to 4.6 percent last year from 2.7 percent in 2008 as fears about joblessness forced consumers to stow away more cash for hard times, and banks and consumers cut back on credit-fueled spending. Credit card debt, home equity loans and other kinds of credit that spawned robust growth in consumer spending in the past shrank during 2009 and will continue to decline this year, economists said.
As overstretched consumers continue to pay off debt and build savings this year, Mr. Silvia said, spending will simmer down to an average 1.4 percent growth rate — anemic by historical standards.
He sees a darker side to the business spending surge on equipment and software last quarter. Rather than foreshadow a return of hiring, he said, businesses during the recession used such technology investments to help cut labor costs, since in some instances workers’ output can be replaced by using more sophisticated equipment. Labor costs, including wages, health care and pensions, remain the single biggest expense for the vast majority of businesses.
Many U.S. companies stayed afloat and even managed to be profitable last year because of this aggressive cost-cutting, accompanied by drastic layoffs. Adding to this underlying trend, Mr. Silvia said, was the congressional threat of new mandates for health care coverage that would add to labor costs — making businesses even more reluctant to hire.
But Congress’ actions early last year to provide $862 billion in stimulus spending on health care, education, infrastructure and jobless benefits did provide some help to the economy, which peaked with an 8.1 percent surge in federal nondefense spending in the fourth quarter, Mr. Silvia said.
“The longer-term challenge for the economy” lies in the aftermath of the stimulus, he said. Congress is considered likely to extend jobless and health care aid in coming weeks, but much of the rest of the stimulus is scheduled to expire this year.
About the Author
- Inconvenient truth: China, developing world now biggest source of greenhouse gases
- U.S. unemployment falls to five-year low of 7 percent; 203K jobs added
- Economic growth jumped to 3.6 percent in summer
- Spending on social welfare rose as economy tanked during recession
- Treasury aims to sell off GM stock by end of year
Latest Blog Entries
By Tom Fitton
New photos confirm the attack's coordination and its cover-up
- Obama takes 'selfie' at Mandela's funeral service
- Somber duty: U.S. presidents in hot demand at Mandela's memorial
- Chinese man fed up with his girlfriend's shopping jumps to his death
- FITTON: A closer look at the Benghazi lie
- American bourbon now better than Scottish whiskey: U.K.-born expert
- Israeli P.M. Benjamin Netanyahu backs out of Nelson Mandela funeral
- Troops forced to rely on welfare, holiday charity
- Obama lied about Syrian chemical attack, 'cherry-picked' intelligence: report
- Obama shakes hands with Cuba's Raul Castro at Nelson Mandela's funeral
- NYC alarms with notice: Immediately surrender your rifle
Independent voices from the The Washington Times Communities
Find the latest news and happening that effect those in the Washington D.C., Northern Virginia and Maryland Metro region.
Global economy, the civilizing power of markets and public morals.
News and opinion from a Millennial Urbanite with Southern sensibilities,
Notes from a running nerd: musings and more on all things running.
White House pets gone wild!
Let it snow