Word: wyss
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...first time in its history, observed David Wyss, chief economist of Standard & Poor, the U.S. is in its 10th straight year of economic growth. "In dog years this expansion is about 70," he quipped, "but it is still behaving like a puppy!" Lawrence Lindsey, a resident scholar at the American Enterprise Institute and former member of the Federal Reserve Board, remarked that though economics is supposed to be "the dismal science," he and his colleagues on TIME's board were sounding full of "Panglossian optimism." No, the economists did not contend that this is the best of all possible worlds...
...Wyss, Sinai and other members of TIME's board think the new cut by itself is too small to have much impact. Other rates, on bonds for example, had already been adjusted downward in anticipation of a Fed move. But it is a heartening sign that Greenspan and the other Fed governors have become convinced that a worsening slowdown is now a greater threat than renewed inflation. Since Greenspan has long preferred to move rates in a series of small, repeated steps, the economists on TIME's board devoutly hope that more reductions will follow, late this year...
...Wyss is more pessimistic. He forecasts a GDP increase for all 1999 of only 1.5% and an unemployment rate rising to around 5% by the end of next year, and then 5.5% by late 2000. (Roach guesses 5% a year from now, and Sinai 5.3% by mid-1999.) Those estimates are all significantly higher than August's 4.5%, not to mention the 28-year low of 4.3% touched last April and May. It would be anything but bad, however, for a period of "growth recession." Even a 5.5% jobless rate would be lower than any the U.S. achieved between August...
...already dwindling, to the grief of investors who saw the Dow Jones industrial average plunge from a July 17 high of 9337 to an Aug. 31 low of 7539, at least partly because it became obvious that earlier expectations of a continued smart rise in profits were wrong. Wyss expects after-tax profits to drop about 2% this year and stay essentially flat in 1999, perhaps rising a nearly invisible...
...best, Wyss and Sinai expect not even the beginning of significant world recovery before the year 2000--and some wounds will remain unhealed long after that. The era of "everybody investing in everything, everywhere" is finished, at least for a good long time, says Sinai. He thinks economists may even reluctantly stop preaching the gospel of totally free markets globally and accept the idea of a greater degree of government control, though far less than in old-fashioned command economies...