Coast-to-Coast
Business Forecasts
Not all alumni can come to Chicago for the Business Forecast Luncheon–so
the forecast comes to them. In cities across the country, thousands
of alumni convene annually to hear Chicago GSB experts weigh in
on the economic outlook for the coming year.
The first of these forecasts, held at the Waldorf-Astoria in New
York City in December, was attended by nearly 300 alumni and guests.
Joining Marvin Zonis and Joel Stern was Robert Z. Aliber, professor
of international economics and finance.
Aliber’s economic outlook was slightly grim. “Things will be the
same until they worsen. To say they will be the same is to suggest
that the spending momentum will continue to drive the economy
forward until there is a sharp shock because one of the unsustainable
values hits a limit, and the lenders/investors adopt a Scrooge-like
stance. In the meantime, the U.S. GDP will continue to grow at
about 3 percent a year, and there will be somewhat upward pressure
on the consumer price level as a result of higher labor costs.”
When will it all go south? “The same forecast might continue for
another year or even six quarters,” Aliber said. “But shocks are
inevitable; it is too late for the Titanic to move out of the
path of the icebergs.” Read the entire text of Aliber’s forecast
below.
For information on forecasts in Cincinnati, Dallas, Denver, Houston,
Los Angeles, Milwaukee, San Francisco, and Orange County, California,
contact Cindy Andresen at cindy.andresen@ gsb.uchicago.edu or
(773) 834-0229.
IN THE PAST YEAR, productivity surged, unemployment dropped, and
the economy continued to grow at an astonishing rate. Do the 1990s
represent the age of a “new economy”?
Not according to John Huizinga, who along with Joel Stern and
Marvin Zonis offered predictions for the coming year at the annual
Business Forecast Luncheon December 1.
“People whose memories extend only back to the 1970s are frequently
found in today’s press supporting the view that the U.S. is experiencing
unprecedented growth in productivity, presumably due to the use
of computers and the Internet. This is not so,” said Huizinga,
deputy dean for the faculty and Walter David “Bud” Fackler Professor
of Economics.
From 1959 to 1972, annual productivity growth in the U.S. was
3.1 percent. From 1972 to 1985, the U.S. experienced a slowdown,
with annual productivity growth slipping to 1.7 percent. From
1985 to 1998 the annual productivity growth held steady at the
reduced 1.7 percent rate. Examining the years from 1995 to 1998
alone shows that productivity growth rebounded to 2.6 percent.
“We have moved about two-thirds of the way back to the pre-1973
world,” Huizinga said, “an improvement, and most likely sustainable–but
not unprecedented or new.”
Huizinga characterized the U.S. economy in the coming year as
“slowing but still growing,” and said he expected slightly higher
inflation, slightly lower real growth, no change in the unemployment
rate, and a larger trade deficit in 2000.
In 1999, inflation rose for the first time in six years, and Joel
Stern, ’64, managing partner of Stern Stewart & Co., agreed that
inflation would rise again in 2000. Part of this is due to the
recovery in Asia, because the U.S. inflation rate was reduced
by the Asian crisis through falling commodity prices and collapsing
exchange rates against the dollar.
“There will be no help on inflation this year from Asia,” Stern
said. “Of course, globalization and its attendant competitive
pressures and huge productivity gains are the other side of the
inflation story. But these forces must continue at their recent
strong rates to keep inflation down.”
Stern cautioned not to look for much in the stock market next
year. “The market glow from the past four years will change from
warp speed to more recognizable, humdrum 7 to 9 percent gains
before dividends,” he told the 1,300 alumni and friends who attended
this year’s forecast. “Not much partying there in Y2K.”
His overall forecast, Stern said, is for “solid, relatively low
inflationary growth for another year, and definitely no recession.”
While agreeing that the U.S. outlook is positive, Marvin Zonis,
professor of business administration, said vast reaches of the
world will become more impoverished, more unstable, and more dangerous
in 2000. The majority of the former communist states will continue
to dissolve into death and destruction, and the “long, slow decline
of Hong Kong [will] continue,” Zonis said.
The United States and Europe, on the other hand, will continue
to prosper and to transform their economies into “more efficient
technological marvels.” Latin America and East Asia also will
make economic progress.
“Globalization–read Americanization–is sweeping the world,” Zonis
said.–M.M.B.