BLS DAILY REPORT, THURSDAY, JANUARY 2, 1997 The U.S. economy will be the picture of health this spring when it begins its seventh year of economic expansion -- firmly on the track of steady growth with low inflation -- according to 23 analysts surveyed for BNA's annual economic outlook. The prospects for continued growth in 1997 are excellent, analysts say, with scant signs of rising prices or wages posing a threat. They predict GDP will grow 2.2 percent and inflation 3 percent in 1997. The types of imbalances that typically threaten to throw the economy off track this far along in an expansion are not on the horizon, the group agrees, although some forecasters are more cautious than others about underlying strengths. As the new year begins, analysts are more worried about the economy overheating than they are about it slipping into recession. More than half the economists expect the Fed to give a slight boost to short-term interest rates during the second half of the year. Global economic growth is expected to accelerate ....The economy should continue to churn out jobs in 1997, but at a slower pace than in 1996, analysts believe. Job creation in the new year will likely be similar to the second half of 1996, when a slowdown in the economy from the heady pace of the second quarter decelerated payroll growth ....The forces driving up the overall CPI in 1996 -- energy prices and food prices -- will abate in 1997, as Iraq boosts oil production and agriculture prices stabilize ....Tight labor markets and rising wages could eventually force firms to boost prices for the goods they sell. And, while advancing labor costs probably would not show up in the overall CPI -- they would be masked by the progress made on food and energy prices -- they would manifest themselves in the core rate of inflation ....(Daily Labor Report, Special Report). "Those Vicious Business Cycles: Tamed but Not Quite Slain" is the lead article in the New York Times' "Outlook '97" business section. The article says that, historically, economic growth, as measured by changes in the GDP, generally moved from one extreme to another. But recently, the peaks and valleys in the business cycle have diminished. A number of experts, while warning that recessions will still occur, argue that broad economic changes should help ease the ups and downs of the path ahead. The all-industries median first-year wage increase compiled in 1996 by BNA from newly bargained contracts is 3 percent or 40.8 cents per hour. Comparable figures for 1995 were 3 percent or 40 cents an hour. In manufacturing agreements, the wage increase in 1996 is 3 percent or 39.9 cents an hour; in nonmanufacturing settlements (excluding construction), the median wage increase in the first year of the contract is 3 percent or 35 cents. The current construction median was 3.5 percent or 65 cents ....(Daily Labor Report, pages 2,D-1). Asia's "economic miracle" of the past 30 years, the future of which has been questioned as growth in key countries has slowed, could continue for many decades, according to an authoritative Swiss report. But further advancements well into the 21st century will depend on governments pursuing policies that sustain high savings and investment and bring reform to agriculture and services, said the report from the Union Back of Switzerland ....Policies that subsidize sunset sectors such as agriculture or heavy industry and those that artificially raise labor or capital costs appear more important in explaining slowing productivity growth than any shortage of new technology, according to the report ....(Washington Post, page D13).
