Upheaval in Washington; and the Economy Rolls On

Three-plus and four the growth rates went by Ninety-four was the year of the cyclical high By nearly 3 million employment did grow Enough for incumbents to really crow. It was trucks, it was buildings and lots of new tools In defense and refis downsizing did rule Inflation emerged from its larval state The bond market feared it would very soon rage. The folks at the Fed saw diminishing slack And in six of the months they did cutback Across the spectrum rates did soar Sending bonds and derivatives down through the floor. NAFTA was in and GATT drew near The Ralph and Ross were about spreading fear Ira's health care went down for the Count But reform will be back in a lesser amount. The Fed and the taxes will in '95 slow But in late '94 they bad not much to show This year will be up but growth will dive As we wend our way on throughout year five. Housing will falter and exports regain Government drag will be less of a strain Consumption will slow as debt burdens jump Inflation will take but a modest bump. Incumbents were swept from office in glee And the Rs were in the saddle from sea to sea Bill, Bob and Newt will be in charge How they will work is a question quite large. As bankers we know that borrowers abound But we wish to make loans that are quite sound Bank boundaries are fading across the land A new world is coming in which some will stand. In the waning days of 1994, it was time for the annual rush of forecasts, as well as a time for reflection. We just had cruised through the fourth year of an upturn whose sluggish start masked its beginnings. The unemployment rate, though not strictly comparable to the figures of earlier years, is in territory not seen since the late 1980s. Payroll employment gains between January and October were 2.6 million, and there are anecdotal reports of difficulties in finding employees. The industrial sector remains robust, with booming motor vehicles and business equipment production. Capacity utilization figures have reached the highest level in 14 years. The drumbeat of strength has shifted concern away from weak economic performance. The focus is now on the amount of inflationary pressure, the degree of slack left in the system, and the sources of growth during 1995. The pace of residential construction and home resale have slackened and motor vehicle sales are showing signs of plateauing. The increase in exports and continued gains in capital investment will offset some of the weakening in consumption and housing as the expansion continues through 1995. …