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Veteran Economic Journalist Sees Healthy US Economy

Despite widespread perceptions that the US economy is in fragile condition, veteran journalist Mike Jensen says it is, in fact, far healthier than most people believe it to be.

Jensen, a former Emmy-award-winning Chief Financial Correspondent for NBC News and Financial Reporter for the New York Times, has spent 30 years covering major economic events. Defending his rosy view of the economy at the SVIA's 2003 National Forum, Jensen noted that the nation's Gross Domestic Product grew at a 3.3 percent annual rate in the second quarter and that inflation is virtually non-existent; the core Consumer Price Index, excluding food and energy, rose only 0.1 percent in September. The weakest link in the economic chain is unemployment, Jensen said, but even there the situation is better than it appears to much of the public. While the unemployment rate currently hovers at 6.1 percent, he observed, it has been far worse in the past, reaching 7.8 percent in the recession of 1990-91 and 10.8 percent in the recession of 1982.

Given that the nation has been hammered over the past two years by the terrorist attacks of September 11, 2001, the subsequent fighting in Afghanistan, war in Iraq, a recession and a wave of corporate scandals, the economy has actually proved more resilient than fragile, Jensen said. He blamed the gloomy public sentiment in part on the media, which recognizes that negative news sells, and the public's preoccupation with Wall Street. "Main Street economics show a slow and gentle ride," he said. "By contrast, Wall Street is bungee jumping, with the Dow Jones Industrial Average moving up 300 points one day and down 300 points the next, all reported on TV and radio as if it were the Indy 500."

Given his current assessment of the economy, it is not surprising that Jensen is bullish on the outlook for the next 12 months. An outlook, which he explains, is bolstered by a recent pickup in capital spending by businesses. "New capital spending leads to new hiring," he reasoned.

Over the next 12 months, Jensen expects GDP to grow at a five percent to six percent rate, unemployment to fall to 5.8 percent or lower, inflation to stay under 2.5 percent as measured by the core CPI, interest rates to trade in a very narrow range, and the Dow Jones Industrial Average to cross above the 10,000 mark. "Corporate profits are strong and investors are eager to get back into the game," he said. He discounted the chances of the economy slipping into a deflationary mode, arguing that inflation has kindled up just enough to preclude that from happening.

This entire bullish scenario could be derailed, Jensen conceded, if the US became bogged down in an extended quagmire in Iraq, if there were a continued escalation of the problems in the Middle East; if a major new terrorist attack undercut business and consumer confidence; if the US were to become embroiled in a new war with North Korea or some other nation; or if the federal budget deficit continued to balloon out of control. "I would say there is a 25 percent chance the worst-case scenario will occur," Jensen said.

Jensen's forecast for the next decade is GDP growth to average three to four percent a year, stock market returns to average eight to ten percent, and new jobs to be added to the economy at the rate of 200,000 to 300,000 per month. "One reason is that if we get this situation stabilized in Iraq within two years, that country will be capable of producing three million barrels of oil a day, as it was before the war. Iraq could possibly produce as much as 12 million barrels a day, which could result in a long period of oil market stability," he said.

Looking even further ahead, Jensen foresees more good things for the US economy. "America wins because of freedom," he said at the end of his talk. "Our system of meritocracy continues to attract the best and brightest from around the world. With all of our problems, and all of our challenges, I see an absolutely wonderful future for us, for our children and for our grandchildren."

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