The economic growth that the United States enjoyed in 2005 will continue in 2006, as stronger business investment begins to pick up the slack on the part of consumers who will curtail the white-hot spending that has been a key factor in propelling the economy, according to Wharton faculty members and private-sector economists.
In addition, oil prices will remain high in 2006, but not much higher than they are now, the residential real estate boom will cool and American workers will be forced to deal with a volatile employment market, these experts say.
Finance professors Jeremy Siegel, Richard Marston and Nicholas Souleles agree that the pugnacity of the economy in the face of skyrocketing fuel prices was the most heartening development of 2005. "We had a real test this summer and fall in terms of the oil shock. The remarkable thing about the economy is how resilient it is," Marston says. "We have been growing at a reasonable pace since early 2003. The growth of corporate profits isn't as great as it was in the first 18 months of the recovery, but companies have been churning out higher earnings quarter after quarter."
Souleles says recently released figures on growth in gross domestic product and job creation represented the latest good news. GDP rose at an annual rate of 4.3% in the third quarter, according to the U.S. Bureau of Economic Analysis, and 215,000 new non-farm jobs were added in November, according to the U.S. Bureau of Labor Statistics.
"It looks like the economy has weathered both the hurricanes and the energy spike pretty well," notes Souleles. "The third-quarter GDP number was revised up from an already reasonably good number despite all the problems we have had. Without [the Gulf Coast storms and high oil prices], there might have been extraordinary third-quarter growth.
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