Will Healthcare Save the U.S. Economy?

(Headlines - scroll down for full stories)
1. Will Healthcare Save the U.S. Economy?
2. Trade Deficit Is Second Highest Ever
3. GM, Ford to Merge?
4. Survey: CEOs Expect Slower Economic Growth

1. Will Healthcare Save the U.S. Economy?

The healthcare sector may save the U.S. economy from tumbling into a deep recession, says BusinessWeek.

BusinessWeek points out that the healthcare sector has added 1.7 million new jobs since 2001 while the rest of the private sector collectively has added no jobs. Without healthcare, says BusinessWeek, "the nation's labor market would be in a deep coma."

Story Continues Below

The magazine says that without job growth in healthcare, the unemployment rate would easily be 1 to 2 percentage points higher. The healthcare sector added 35,000 jobs in August. That's double the increase in construction and much more than any other sector, says BusinessWeek.

"Almost invisibly, health care has become the main American job program for the 21st century, replacing, at least for the moment, all the other industries that are vanishing from the landscape. With more than $2 trillion in spending - half public, half private - health care is propping up local job markets in the Northeast, Midwest, and South, the regions hit hardest by globalization and the collapse of manufacturing," says BusinessWeek.

The periodical also says that because healthcare is labor intensive, the estimated $2 trillion put into healthcare generally goes to pay workers, which is money that then finds its way into the economy.

However, says BusinessWeek, there are some negative consequences for relying on the healthcare sector to save the economy. Ironically, it may be the large government expenditures for healthcare that are dragging down the deficit. In addition, the growing cost to companies providing health insurance could actually lead to layoffs.

Plus, relying on the healthcare sector to save the economy will eventually lead to an undiversified economy. BusinessWeek says, "If current trends continue, 30% to 40% of all new jobs created over the next 25 years will be in healthcare. That sort of lopsided job creation is not the blueprint for a well-functioning economy …

"The biggest worry is that demand for health care will absorb too much of the workforce and squeeze out other types of jobs. If medical spending rises to 25% of gross domestic product by 2030, as many economists expect, healthcare's share of jobs could grow to 15% or 16% of the labor market from today's 12%, based on historical patterns."

Editor's Note:

The healthcare sector is one of the trends we think will lead the markets in the coming years. Go here now.

2. Trade Deficit Is Second Highest Ever

The U.S. trade deficit ballooned to the second highest level in history in the second quarter of 2006, according to the Commerce Department.

The nation's current account deficit, the broadest measure of foreign trade, rose to $218.4 billion. That's 2.4 percent higher than in the previous quarter. As a percentage of GDP, the deficit remained at 6.6 percent.

As the AP explains it, "The current account is the broadest measure of foreign trade because it covers not only trade in goods and services but also investment flows between countries. The deficit represents the amount the United States must borrow from foreigners to cover the shortfall between exports and imports."

The current account deficit underscores the nation's dependence on foreign reserves of dollars. If the central banks of other nations begin to dump dollars because of a loss of value, it could mean a potential default for the U.S. Stock prices would fall and interest rates would skyrocket.

According to the AP, the U.S. is now on track to surpass the annual deficit record set last year when the U.S. trade deficit hit $791.5 billion. This will be the fifth consecutive time that the U.S. has posted a trade deficit.

The deficit on goods in the second quarter rose to $210.6 billion, according to the AP. That's a $2.6 billion increase from the first quarter. Most of the increase was due to surging oil prices. In addition, the surplus on services that the U.S. relies on to offset its deficit on goods, narrowed to $16.8 billion.

The deficit also reflected a record deficit on investment flows. That deficit reached $4.2 billion, indicating that foreigners earned more on their U.S. investments than Americans did on their investments abroad.

Editor's Note:

Find out how a timely call on the dollar can make profits of $5,950 in five weeks. Go here now.

3. GM, Ford to Merge?

Executives of General Motors Corp. and Ford Motor Co. have discussed a possible merger or alliance, the trade journal Automotive News reported Monday. Both companies declined comment.

Automotive News quoted what it said were several people familiar with the talks as saying that discussions involving senior executives began in July and are not taking place now.

The journal quoted one source as saying that GM Chief Financial Officer Fritz Henderson and his Ford counterpart, Don Leclair, discussed a GM-Ford alliance in August.

The report comes as GM and Ford have been slashing their work forces and closing plants in efforts to reverse multibillion dollar losses. Their sales have been hurt by competition from more fuel-efficient models from Asian automakers.

As the two biggest U.S. automakers, any deal would presumably face scrutiny by U.S. antitrust regulators.

In July, GM, Renault SA of France and Nissan Motor Co. of Japan announced a 90-day review of an alliance among them.

"As we've often said, GM officials routinely discuss issues of mutual interest with other automakers," GM spokesman Brian Akre said before business hours Monday. "As a policy, we do not confirm or comment publicly on those private discussions, which in many cases do not lead anywhere."

Ford Oscar Suris, also speaking before business hours, said: "We're not commenting on speculation."

Talk of alliances involving GM came after GM shareholder Kirk Kerkorian, who owns a 9.9 percent stake in the company, called for GM, Renault and Nissan to pursue an alliance.

Carlos Ghosn, the chief executive of Renault and Nissan, has said the benefits from an alliance would be similar to the gains from the Renault-Nissan alliance, which have included cost savings from joint purchases of auto parts.

Ford earlier declined to comment on an August Wall Street Journal report that then-Chief Executive Bill Ford approached Ghosn about a Ford alliance with Renault and Nissan.

Editor's Note:

The Baby Boom crisis is just beginning. Protect your wealth from this looming tidal wave before it's tool late. Go here now.

4. Survey: CEOs Expect Slower Economic Growth

U.S. chief executive officers expect slower economic growth over the next six months, according to a quarterly survey released by the Business Roundtable Monday.

The group's CEO Economic Outlook Index dropped sharply to 82.4 in September from the second-quarter reading of 98.6, to its lowest level in three years.

The survey pool includes Roundtable members - CEOs from large U.S. companies. Any number higher than 50 indicates economic expansion.

Of CEOs surveyed, 23 percent said they had to absorb "almost all" of the effect of higher energy costs, which can take a toll on profit margins.

Among other questions, 74 percent said they expected their company's sales to rise in the next six months, 50 percent said they expected their company's capital spending to remain unchanged, and 29 percent said they expected their company's employment to decline.

In the third quarter of 2003, as the U.S. economy accelerated out of a downturn, the Economic Outlook Index stood at 67.7, according to a Business Roundtable spokesman.

The group surveyed 109 of its 160 member companies.

Editor's Note:

Three steps to success! Discover how you can multiply your profits and cut risk down to size in three easy steps. Go here now.

Editor's Notes:

The healthcare sector is one of the trends we think will lead the markets in the coming years. Go here now.
Find out how a timely call on the dollar can make profits of $5,950 in five weeks. Go here now.
The Baby Boom crisis is just beginning. Protect your wealth from this looming tidal wave before it's tool late. Go here now.
Three steps to success! Discover how you can multiply your profits and cut risk down to size in three easy steps. Go here now.
The nation's drinking water contains more than 2,100 toxic chemicals that can cause cancer, yet the EPA has established enforceable safety standards for only 87. Protect your health now.