Bank of the West U.S. Outlook Report for November 7, 2014

  • by BPC Staff
  • on November 7, 2014
US Outlook Report: Updating Our Virtuous Cycle Checklist

There she blows!  Like Captain Ahab trying to locate the elusive white whale from Moby-Dick, economists have been trying to spot a pro-growth virtuous cycle that would signal to the Fed that it’s okay to normalize interest rates and to others that it’s okay to come out of our bunkers.

Noticeably absent in this economic expansion, so far, has been the pro-growth dynamics normally described as a virtuous cycle, where better job and productivity growth, begets stronger wage growth, pushing consumer demand for products and housing higher, and signaling to businesses to ramp up production and investment, which in turn leads to more jobs and productivity growth. Instead, we have gotten short bursts of activity followed by stagnation and retrenchment. In this week’s report we make the case that a virtuous cycle may finally be near in the United States.

Working through our virtuous cycle checklist on labor market progress, productivity, wages, consumer spending, and business expansion, we can check off at least four of the five categories, we look at to determine a virtuous cycle is underway.  Consumer spending is the only area where we still fall short, though strengthening consumer confidence and the consumers ability to borrow and spend suggests a stronger showing from the consumer in the quarters ahead.

In short, we may have spotted our white whale; the elusive virtuous-cycle for the U.S. economy appears tantalizingly close.

To find out more, check out this week’s US Outlook Report.