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[ThatHawaiiGuy]

Doubts about Recovery

by DW Mackenzie

[Posted October 08, 2003]

The popular press has adopted a more optimistic tone regarding economic conditions. The reasons for this are clear. It appears that the current recovery is picking up pace. Recent reports indicate that second quarter GDP for this year increased by 3.3%, instead of the earlier 3.1% estimate. This is more than double the GDP growth rate from the preceding two quarters. Analysts expect 4% or higher growth for the following two quarters, with some predicting 6 to 7% growth. Falling inventories and strong spending, some say, indicate that this recovery will continue.

Those who comprise the current pool of unemployed labor will surely see this as good news. Unemployment rates have not come down with the recent surge in GDP. Falling inventories will no doubt prompt employers to take on more employees. In trying to assess the merits and shortcomings of this recovery we should, however, consider both the changing composition of GDP and the source of its expansion.

However, this fact is crucial: a considerable portion of this increased GDP has come from increased military spending. Military spending rose 45.8% for the second quarter. This is the strongest quarterly increase in military spending since the Korean War.

http://www.mises.org/fullstory.asp?control=1337