Hurricanes Katrina and Rita did little to dampen the thriving American economy in 2005 despite an upsurge in energy prices. Overall, the American economy performed well and analysts are projecting the United States will continue to flourish this year.
In spite of natural disasters, 2005 was a good year for the American economy. Nearly 2 million jobs were created, the economy grew at 3.5 percent and both core inflation and unemployment remained low.
For 2006, economists predict growth will continue with business spending and job creation fueling most of the success of the economy this year. Thomas Donohue, President of the U.S. Chamber of Commerce, a major business organization, explains the prediction.
"The strong performance should continue throughout 2006. Chamber economists see 3.5-3.7 percent growth in the first half of the year and then a bit of a slowing for an overall growth rate of 3.5 percent."
One hundred and sixty thousand jobs are expected to be created each month, which will keep the unemployment rate at around five percent.
As for fuel prices, they are expected to come down, but not by much. Energy analysts predict the price for crude oil will hover around $65 a barrel.
Most economists are painting a bright picture for 2006, but warn there are pitfalls. Some believe high-energy prices and rising interest rates could cool economic growth.
President Bush said he is committed to keeping the economy growing, and called on Congress to make earlier tax cuts permanent, to ensure growth.
He said free trade will also help. “We're home to 5 percent of the world's population. That means 95 percent of our potential customers live abroad. I believe this country ought to do everything it can to open up markets for our products overseas. I know it's going to be necessary to make sure this economy grows short term and long term."
In the long term, the US economy faces several challenges, according to Matthew Slaughter, a m ember of the President's Council of Economic Advisors.
"If we look beyond 2006, we can see a number of challenges such as the demographic shift of an aging population and the need to best educate our children in the face of rising income inequality across educational groups."
Seventy-seven million baby boomers, those born between 1946 and 1964, are expected to begin retiring from work in the next couple of years. That will have a dramatic effect on the economy because of health insurance costs, pensions and retirement plans.
U.S. Treasury Secretary John Snow says it will be even more essential to properly educate younger workers. "The success of this economy is entirely dependent on the skill level of our population and one of the issues we're facing today is skill gaps. Sizable skill gaps that reflect educational needs."
For now, economists expect a relatively robust economic year, with the technology sector seeing the biggest gain: projected growth of 9.6 percent.