After having experienced a few quarters of exhilarating economic news, the U.S. economy declared an intermission to strong growth. Sudden changes in oil-market conditions left users scrambling for supplies and reevaluating future availabilities. Geopolitical conditions likely to create new problems remain a concern.
Oil prices, forecasted to be in the $30-a-barrel range for 2004, reached new ceilings this summer. Prices currently stand at the mid-$40-a-barrel level. This recent experience offers yet another example of basic economic conditions changing by fits and starts.
The pause in economic conditions is likely to be temporary. To be sure, few believe that oil prices will recede to below $30 a barrel, where they were recently. As a result, less growth is expected than forecasted at the beginning of the year; less money will be available for domestic purchases after paying for energy. A retrogressive swing in the business cycle is not anticipated, however.
One notable sign of the economic pause in the Silver State is the upward movement in June unemployment rates for Nevada, Las Vegas and Reno. Rates ranged from 3.8 percent to 4.5 percent, still favorable compared to rates a year ago, which were in the 4.7 percent to 5.8 percent range.
Another clear sign of changing conditions is growth-rate patterns. Indeed, there is a noteworthy difference in the pattern of recent growth and the longer-term growth rates. Recent growth rates, measured on a month-to-month basis, mostly show negative signs. On the other hand, most year-ago growth rates show positive signs. This difference captures the softening of growth, which is likely to be a pause in the expansion rather than a downturn. As a result, some lowering in the expected performance for 2004 is called for.