U.S. Expansion Gallops Toward Record Books

The U.S. economy is galloping toward a date with destiny Tuesday when it will enter a record 107th month of growth. Since the expansion began in March 1991, millions of jobs have been created, Americans’ personal wealth has soared and new technologies, especially the Internet, have begun to change how business is done in revolutionary ways. On Feb. 1, just a month shy of nine straight years of growth, the current expansion will surpass the Vietnam War-fueled 1960s when the economy grew for 106 months from 1961 through December 1969 before lapsing into recession. Remarkably, analysts see scant signs that the current boom is faltering. To the contrary, Federal Reserve policy-makers worried about the economy’s vigor are preparing to raise interest rates to slow it down at the end of their two-day policy-setting meeting Wednesday. The Commerce Department said last week that growth in gross domestic product continued at a booming 5.8% annual rate as 1999 ended.

U.S. employment figures to be released Friday will probably provide more justification for the Fed to push interest rates higher. The economy probably added 267,000 jobs during January, and the unemployment rate probably dropped to 4%, the lowest level since 3.9% in January 1970. By Friday, it is widely assumed that Fed policy-makers will have raised the overnight bank-lending rate for a fourth time since June. All 30 banks and securities firms that deal directly with the Fed expect the Federal Open Market Committee to increase the rate by a quarter percentage point to 5.75%.

Other economic reports this week are likely to reinforce the picture of continued strength.

* Today, the Commerce Department is expected to report that personal income and spending increased in December as retailers reported strong Christmas sales. Income probably rose 0.4%, the same as November. Spending probably rose 0.8% in December after increasing 0.5% in November. Department and chain stores reported their strongest Christmas sales in seven years during 1999.

* On Tuesday, the National Assn. of Purchasing Management is expected to release figures showing that the U.S. manufacturing economy expanded for the 12th consecutive month. The NAPM’s index probably registered 56.3 for January versus 56.8 for December. A reading of 50 or more suggests the economy is expanding.

* Construction spending probably rose 0.1% in December after rising 2.6% in November, analysts said. The Commerce Department is to release that report Tuesday as well as a report Wednesday that’s expected to show that sales of new, single-family homes rose 2.8% in December to 889,000 at a seasonally adjusted annual rate.

* The index of leading economic indicators, a gauge of future economic growth, probably increased 0.3% during December, the same as November, analysts said. The Conference Board is scheduled to issue the leading indicators report on Wednesday.