Solid Job Growth Forecast for Next Two Years
Even possible trade war with Japan couldn't dampen enthusiasm of leading economists
WASHINGTON — AMID the frost of winter, a promising spring has arrived in the American economy.
Government and private economists now agree that the United States seems poised for two years of solid, jobs-producing growth.
United States workers, burdened by the lingering effects of recession, could be the biggest winners. But a strong economy would also be a boon to the Democratic Congress, which must face the voters in the November election.
Even the threat of a trade war with Japan this week could not dampen the enthusiasm of economists.
Laura Tyson, the chairman of the president's Council of Economic Advisers (CEA), says confidently: ``We forecast the economy will grow at 3 percent in 1994 and will remain on track to create 8 million jobs over four years.''
Approximately 1 million jobs were created during the four years of the Bush presidency.
William Dunkelberg, president of the National Association of Business Economists (NABE), predicts ``a year or two of real tranquility and stability'' in the American economy.
Dr. Dunkelberg says the United States will edge toward full employment as the jobless rate drops to about 6.1 percent next year. Inflation could rise a little - from 3.1 percent in 1994 to 3.4 percent in 1995 - but it will be under control.
Housing starts should remain strong in both years at about 1.4 million units each, while truck and auto sales should edge up gradually from 14.9 million this year to 15 million next year.
``The outlook is quite good,'' Dunkelberg says.
President Clinton may also get an opportunity to tell Republicans and conservative Democrats, ``I told you so.''
The whopping tax increase that he won last year on upper-income Americans apparently has not crimped economic growth.
America is achieving all this, surprisingly, with little help from Europe or Japan.
Both are suffering from recessions - Japan's is its worst since World War II. Yet US growth is steaming ahead even without a significant lift from exports to those two major economic centers.
Economists look for Europe to revive, perhaps in 1995, and buy more American goods. Japan could do the same in 1995 or 1996 and keep the US growing.
Although President Clinton has held office for only 13 months, Dr. Tyson gives the Clinton administration credit for much of the current improvement.
The president's determination to cut the federal budget deficit - from $254 billion in fiscal year 1993 to an estimated $175 billion to $185 billion in fiscal year 1995 - has reduced interest rates to their lowest levels in decades.
Low interest rates were one reason why a survey of 44 business economists in NABE predicts that capital investments will rise another 9 percent this year and 7 percent in 1995.
Tyson says: ``Investment-driven expansion ... was the source of dynamism for the American economy'' in 1993 and 1994. She says heavy business spending should eventually boost US living standards, raise productivity, and increase incomes for all Americans.
If there's a cloud on the horizon, it's the sharp disagreements between the US and Japan on trade. Tyson noted that, even as she spoke to reporters this week, a meeting was under way at the White House to plan possible trade retaliation against Japan for failing to open its markets to foreign goods.
The CEA estimates that the failure of Japan to trade openly with the US costs American companies $9 billion to $12 billion a year in sales.
The Washington Post complained in a Feb. 13 editorial that Japan has been, in effect, ``exporting its unemployment'' for years by refusing to open its markets, while selling its own products heavily in nations like the US.
BUT the end of the cold war allows the US new latitude in relations with Japan. As a result, the US can elevate its economic interests over its military interests for the first time in 50 years.
Asked by reporters this week whether the US and Japan could tumble into a trade war, Clinton said:
``It could be, but I think they [the Japanese] would have to think long and hard about it.'' He continued: ``We are reviewing all our options. We haven't ruled anything out.''
In his annual economic report to the Congress, the president noted that ``all of our initiatives in international trade share a common purpose: to open markets and promote American exports.''
It is export industries that provide ``the kind of high-wage, high-skill jobs the country needs,'' he says.