It was over six years ago in June of 1998 that Alan Greenspan noted that the US economy was in a “virtuous cycle” and went on to say that “the context of subdued inflation and generally supportive credit conditions, rising equity values are providing impetus for spending and, in turn, the expansion of output, employment, and productivity-enhancing capital investment”. Reading yesterday’s report in Forbes on the service sector’s (unexpectedly) robust growth, it is tempting to roll out Greenspan’s characterization of the economy’s growth again.
An interesting aspect to yesterday’s news about economic growth is that the service sector accounts for about two-thirds of the nation’s economic activity. And according to Stuart Hoffman, chief economist at PNC Financial Services Group “the service sector is not as sensitive to the problems in housing and the automotive industry that dragged down the manufacturing index”. The hotel industry is of course a part of the service sector and that ought to bring forth a few more polyannas particularly in the Big Apple the most notable of whom is Michael Stoler of the New York Sun. The article ends by noting that the DJIA reached 12,325 not a peak in inflation adjusted terms from its high of January 2000 but getting there. The party isn’t over by a long chalk and no one is talking about taking away the punch bowl.