Sung Sohn
Sung Sohn
Sung Won Sohnis a Korean American economist, noted for his skill in economic forecasting. He is currently the Martin V. Smith Professor of Economics at California State University, Channel Islands...
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Even with significant employment gains, the central bank wants to see more inflation and pricing power. The fall election is another hurdle. No hike in the interest rate is likely in 2004.
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Clearly, the economic fundamentals of monetary and fiscal policies, as well as the falling value of the dollar, support a recovery. What we're not sure of is how strong the recovery is going to be.
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But if things start to go wrong -- if business spending doesn't pick up, or state and local governments lay off more people than anticipated, or auto sales fall off, or interest rates go much higher -- then a combination of these factors would really affect the economy going forward.
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This scenario is highly unlikely, but can't be ruled out. The best outcome is a gradual and orderly fall in the value of the dollar improving the trade balance; this is in fact what has been happening.
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If oil goes to $50 a barrel, I think we're talking about 3 percent economic growth, rather than 4 percent growth, possibly. And the jobless rate could actually go up, not down, because the long-term potential economic growth rate is actually 3.5 percent -- we could actually be falling below potential.
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Inflation is not an issue right now. However, it could be in the future. The Fed will begin to worry about inflation because monetary policy affects the inflation rate with a lag of as much as 18 months to two years, so they need to worry about it now.
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Immediately after the terror attacks, we were shell-shocked and stopped doing everything but watching television,
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The bedrock of consumer spending and confidence is employment. The expectations of more jobs has boosted consumer confidence.
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Once the Fed starts raising rates, I suspect they might go up more rapidly than a lot of people realize. Many of us think the Fed will do things slowly and gradually. In fact, they usually do things pretty quickly.
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Once the employment picture stabilizes, around midyear, we should see a more rapid and sustained recovery in consumer confidence.
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The corporate tax cuts may not have an economic impact until months later.
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I'm not bullish on the holiday shopping season, but I'm not as bearish as some people have been.
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I'm not sure we will see a big revision in February; I won't be surprised if we do not.
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There is no reason for the Fed to deviate away from the cautious policy approach, ... The central bank won't raise the interest rate until August or later.