Economic struggles in 4th quarter 2005

With the disappointing growth of only 1.1 percent in the fourth quarter of last year, there were concerns about whether the economy might be slipping back to recession. The numbers on productivity and labor costs reinforces this fear with productivity falling 0.6 percent in Q4 and labor costs rising 3.5 percent. While labor costs increased 3.5 percent, it is doubtful whether wages kept up with this pace, especially when looking at real wages. Hopefully this is a blip, but without effective counter-cyclical economic policy from the Bush administration over the past 5 years and with a growing housing bubble and large federal deficit, current account deficit and a negative savings rate (the first since 1933) the signs are worrying.