Economic Outlook: Mostly Sunny
(Business 2.0) – While pundits argued for the past two years that the economic recovery wasn't real, Nariman Behravesh quietly insisted that it was. The chief economist at forecasting firm Global Insight and his team predicted that the productivity recovery would collapse and corporations would begin spending again. For the coming year, Behravesh offers up more bullish news. —PAUL KAIHLA
Does the rebound still have legs?
Yes. If 2004 was a year of corporate profit growth, 2005 will be one of job growth. U.S. companies have loads of cash and are spending it on technology. [See "How to Ride the Fifth Wave," page 78.]
Some say tech spending is going into a slump. What do you think?
Purchases of IT equipment rose by 12.3 percent last year, after adjusting for inflation. Our projection for 2005 is almost as high. Only about 40 percent of U.S. firms are using PCs and the Internet to any reasonable capacity. If the rest catch up with even the average company, we'll see huge gains.
Gangbusters GDP growth usually means bigger paychecks. Will we see that in this recovery?
Wages as a share of GDP sank last year to their lowest level ever, about 45 percent. The good news is that we've got it rising to just under 46 percent next year. Every 1 percent bump puts an extra $100 billion or so in workers' pockets.