Economic forecast: sunny and bright for years to come.

Old age, the information age and the age of globalization propel the economy into the next millennium.

Today's positive economic reports are leading economists to forecast equally rosy times ahead. As the century turns, the U.S. economy is making an impressive start and is still going

Economists credit a productivity surge that took hold in the final decades of the 20th century for the new economy's prosperity. Even more importantly, they say that the good economic climate should continue.

Economists tend to agree that three dominant forces will propel the U.S. economy into a bright future in the next millennium: the aging of America's baby boom generation, rapidly growing export markets and the explosion of high technology.

The aging of the population in the U.S. - and other nations - will have a dramatic effect on the demand for goods and services, as well as the geographic regions where they will be provided.

In addition, economists agree that information technology will further spur the trend toward freer world trade and will make it easier to communicate, share information and do business from state to state and nation to nation. America's technology edge will continue to raise foreign demand for a bevy of U.S. goods and services, and that demand should increase as foreign economies rebound. (See "... And Around the Globe" on page 32.)

The Economic Effects of Age

It's a fact: The baby boomers are graying, and many members of the previous generation are living past 85. Due to these demographic changes, the things Americans spend the most money on will shift away from youthful favorites, such as clothes and cars, to those products and services the elderly buy, such as health care and tourism.

For example, the aging of the population will ramp up demand for health care services of all sorts. The health services sector, which includes all of the support staff from receptionists to janitors, is expected to add more than 3 million jobs and grow at more than double the economy's growth rate. Of the 30 occupations that the U.S. Department of Labor (DOL) expects to grow fastest between 1996 and 2006, almost half are in the health services sector.

Further, the number of Americans needing long-term care services will explode from 9 million in 2000 to 24 million by 2060, reports the American Health Care Association, a Washington, D.C.-based trade group representing the long-term care and nursing home industries.

A background in gerontology - the study of aging and care of elderly people - will be a much sought-after skill among nurses and other health care workers in coming years, says Anne Rhome, deputy executive director of the American Association of Colleges of Nursing in Washington, D.C. Such a background will be valuable at all skill levels, from relatively unskilled nurses' aides to nurse practitioners who specialize in caring for the elderly.

While the demand for health care is expected to explode, the dollar value of spending on health care is not. The DOL believes that cost-cutting will continue to sweep the industry and will hold down the total value of outlays.

Tourism also is expected to pick up with the aging of the baby boom generation. Retirees tend to travel, both out of the country and within the United States. What's more, the baby boom phenomena is not exclusive to the United States. The populations of other major industrial economies in Europe and Japan are aging as well. These retirees also are expected to boost U.S. tourism in the next millennium.

On the flip side, industries that focus on the youth market - everything from fashionable clothes and racy cars to soda and fast food - are expected to soften. These industries will need to appeal more to elderly customers and to turn to foreign markets for sales growth.

Aging consumers also will have a big impact on state economies in the United States as they choose the places where they will live out their sunset years. Like their parents before them, baby boomers are expected to seek sunshine and warmer climates.

"We see a major shift [of population] out of the plains states and out of the northeast," says Sophia Koropeckyj, a senior economist at RFA/Dismal Sciences, an economic consulting firm in suburban Philadelphia that specializes in regional economics. The fastest growing state economies over the next 20 years, by RFA's measure, will be Florida, Texas, California, Arizona and Nevada.

A great deal of economic activity will follow baby boomers as they retire, Koropeckyj adds. Industries that serve the aging boomers' wants and needs will benefit. Restaurant sales, for example, will grow sharply in the states to which retirees flock. The DOL expects eating and drinking places to be the second-biggest industry for job growth in coming years, although the percentage of job growth in this already huge sector will be modest.

Exports Buoy Some Regions

Industries with strong exports will form pockets of strength in some of the regions baby boomers will abandon. Good times are expected to lie ahead for financial and business service companies, which are concentrated in Northeastern cities. Technology centers - such as Silicon Valley, Dallas, North Carolina's Research Triangle and Northern Virginia, to name a few - also will boom.

In addition, industrial machinery producers in the Midwest will fare well because of export demand. States in the Great Lakes region enjoyed an economic renaissance in the 1990s as developing countries around the world purchased industrial machinery for fledgling factory sectors, and the trend is expected to continue.

In fact, the DOL predicts that capital goods - factory machines, computer equipment, communications equipment and the like - will be the swiftest growing exports between 1996 and 2006.

Computer manufacturing is the industry projected to see the fastest growth in total output over the same period, followed by computer and data processing services. Fewer than one-third of the nation's households are tapped into the Internet, leaving plenty of room for computer sellers to woo new households into the information age. Outlays will grow at a stunning 27 percent average annual rate, predicts the DOL, despite a continuing slide in prices.

Even though the capital equipment industry looks to be one of the strongest sectors of the economy in coming years, the entire factory sector is likely to continue losing more jobs than it creates. Traditional factory occupations - textile workers, machine tool operators, drill setters, lathe operators and others - will post large job declines, the DOL forecasts.

The motor vehicle industry provides a good example of this phenomenon. According to the DOL, car makers and their suppliers will post some of the largest output gains in the economy from 1996 to 2006. At the same time, the industry will be among the biggest job losers.

"We are changing the composition of the technical workforce from the old workforce of pipe fitters and millwrights and industrial electricians to computer people," says Anthony Carnevale, a vice president and economist at the Educational Testing Service, a standardized testing and educational research organization, in Washington, D.C. "That is always the way it is with new technology. [It] creates its own workforce. It does not use the technical workforce that is already there because [that workforce] is not appropriate," unless trained, because different skills are required.

And while high-technology jobs will be among the fastest growing, they won't account for the lion's share of jobs. Carnevale notes that the surge in technology workers in recent years has lifted their share of the workforce to only 8 percent of America's employed. He expects the share to peak at about 9 percent, then decline as companies shed unneeded experts following resolution of year 2000 computer issues.

"Eventually, something will come along and replace the information technology workforce," says Carnevale. "The technical workforce is always changing."

Technology: Job Killer or Creator?

While the technology industry should be an economic growth leader for years to come, it is unclear how the Internet and other information technologies will affect how other industries do business and how people live. Predictions vary widely.

Optimists say jobs will abound as U.S. businesses corner the market for skilled technology workers and Americans demand an ever-growing service economy to support the needs of an affluent, highly skilled workforce.

Pessimists say unemployment will run rampant as the Internet replaces everyone from retail clerks to parking lot attendants and leaves these workers with no prospects for new employment.

Neither group may be entirely right. As Federal Reserve Chairman Alan Greenspan is fond of noting, soothsayers rarely have been able to precisely predict how new technologies would reshape the world. "Innovations in information technology ... have begun to alter the manner in which we do business and create value in ways that were not readily foreseeable even five years ago," he recently told the Joint Economic Committee.

Robert Atkinson believes that information technology - especially as it is applied to the Internet - will replace hordes of low-skilled workers. Atkinson is the director of the Technology, Innovation and New Economy Project at the Progressive Policy Institute, a Democratic think tank based in Washington, D.C.

Atkinson predicts that jobs involving routine data entry, basic transactions or filling out paperwork will be automated over the next two decades. He sees a not-too-distant future where people will conduct most of their basic financial transactions online.

This means the mailroom staffs and billing departments of service companies could virtually disappear as people begin paying their bills online. People already are shopping and banking online. Bank tellers could become a thing of the past. The Internet could eliminate the need for retail clerks and cashiers.

While it could happen, the DOL's forecasts do not anticipate such a shift in the next decade. Cashiers top the list of top job gainers by 2006. Retail clerks rank fifth. Together they will account for just under 1 million additional jobs, according to the DOL.

Atkinson believes that service automation eventually could create a productivity bonanza that will pay off in saved time and will allow people to work fewer hours, take more vacation time or share jobs - all while earning the same high salaries.

But the tradeoff for that extra free time may be reduced job security. Personnel supply services, which are made up mostly of temporary staffing firms, head the DOL's list of industries making the biggest job gains by 2006. Already, Manpower Inc., a Minneapolis-based staffing company, is the largest private employer in the United States.

Most industries geared toward serving the needs of businesses - personnel supply, computer services, lawyers, accountants, etc. - are expected to post strong job gains. A continuing trend among larger companies toward outsourcing business services and a sharp rise in the export of business services is propelling the personnel sector to the forefront of the U.S. economy.

Some experts question whether service automation will be good for the average worker. Social activist Jeremy Rifkin warns in his book The End of Work (Putnum, 1996) that "sophisticated software technologies are going to bring civilization ever closer to a near-workerless world." He sees a looming crisis in which the world will have to deal with hordes of unemployed or find a way to organize society around something other than work.

Harry Wolhandler, vice president of marketing at ActivMedia Research, an online market research firm in Peterborough, N.H., disagrees. He sees the Internet evolving into a service similar to today's telephone service. It will become a basic business tool, and leagues of skilled workers will be needed to make Internet communications and commerce run seamlessly.

"I expect to see plenty of business opportunity [in the new economy] in establishing those services which require a bit of savvy backstage, so that [for example] my hairdresser can put forward a hairdresser web site" without learning to program a computer, Wolhandler says. He adds, "Everyone will have to have some literacy with the Internet, but many will do it on a level that does not really feel technical."

RELATED ARTICLE: Moderate, Steady Growth Lies Ahead in the U.S. ...

In the next three decades, the U.S. Census Bureau predicts that one in five Americans witt be a senior citizen, compared with roughly one in eight in the mid 1990s. In short, America's tabor force is retiring and there are not enough young workers to replace it.

As baby boomers slow down, so will the U.S. economy, the U.S. Department of Labor (DOL) predicts. The DOL publishes a 10-year forecast for the economy every two years, along with its closely tracked industry employment and occupational outlooks.

A slow-growing tabor force will cap gross domestic product (GDP) - the total value of goods and services produced in the United States - at a tepid 2.1 percent average annual rate from 1996 to 2006. That is down from a 2.3 percent average rate in the prior 10-year span.

Consumer spending is expected to match the modest clip of GDP growth, revealing the double-edge of the demographic sword. Although a larger portion of the population will be retired and spending down its savings, the play between the kinds of products that will be hot sellers and those that will run cooler will end up dampening total spending growth from the 2.4 percent annual rate experienced between 1986 and 1996 to a 2.1 percent rate.

The graying of the baby boomers witt cool demand for many items traditionally bought by younger households. Home sales are expected to soften, as are outlays on food, clothing, cars and most big-ticket items.

As domestic demand for many goods and services softens, American businesses increasingly witt turn to foreign markets. Exports are projected to climb at more than triple the rate of GDP, accounting for one-fifth of the economy by 2006, up from just over one-tenth in 1996.

"Reflecting increased globalization of the economy, the foreign trade sector will continue to be the fastest growing component of real GDP," economist Thomas Boustead says in DOL's forecast report. He adds, "No other sector of the economy has evolved so dramatically in recent decades."

- Sherry Kuczynski

... And Around the Globe

The world economy is Limping into the next millennium following a massive financial crisis that has sharply curtailed world trade since 1997, but the World Bank expects most world economies to be running at a steady pace again soon.

World output is projected to grow at a 3.2 percent average annual rate through 2007, up from a 2.3 percent annual rate from 1991 to 1997. Output among the developing countries will grow at a 5.2 percent annual rate, jumping from a 3.1 percent clip.

East Asian and Pacific countries will lead the pack among developing nations, white African nations will fare worst. The Leading industrial nations will grow at a 2.6 percent rate, accelerating from a 2.1 percent rate. The bulk of gains in U.S. export sales will be in Europe over the next seven years.

Although imports to Asia have slumped in the aftermath of the financial crisis, which centered on the region's fledgling economies, Asia holds the best long-term prospects for U.S. exports. Already home to half the world's population, Asia one day is expected to be the world's biggest consumer market.

"[Asia] has very high savings rates, very high investment rates and high population growth," says Mike Englund, chief economist at Standard & Poor's MMS International, a financial consulting firm in San Francisco that focuses on international money markets.

The economic powerhouse at the center of the Asian market will be China. Englund expects China's economy to outstrip Japan's in size by the middle of the century. If China continues on its present economic path, it could become the world's Largest economy in 150 years.

Demographic issues will present a problem for the world's industrial economies over the next 30 years. The baby boom was not exclusive to the United States. Slower Labor force growth as older workers retire is expected to keep a lid on output growth in Europe and Japan, as well.

The leading industrial economies each must cope with "the mismatch between the kinds of [social and medical] benefits they have voted in place versus the capacity of their different populations to actually pay for those programs," Englund says.

- Sherry Kuczynski

Jobs of the Future

Where will the jobs of the next millennium be? According to forecasts from the U.S. Department of Labor, they will be under the bright fluorescent lights of America's corporate offices, classrooms and health care facilities.

Labor predicts that general managers and top executives, receptionists, clerical workers and office supervisors together will account for 1.7 million new jobs through 2006. That compares with 1 million jobs for computer support specialists, computer engineers, systems analysts, database administrators and programmers.

Registered nurses, nursing aides and attendants, orderlies, home health and personal care aides, medical assistants and social workers wilt add 1.6 million jobs. Teachers, teachers' aides and child care workers will add 1.2 million jobs. These office, education and health occupations account for almost one-third of the 18.5 million jobs Labor sees the economy adding by 2006.

Occupations with Largest projected job gains

1. Cashiers

2. Systems analysts

3. General managers and top executives

4. Registered nurses

5. Retail sales persons

Occupations with largest projected job losses

1. Sewing machine operators

2. Farmers

3. Bookkeeping, accounting and auditing clerks

4. Typists

5. Secretaries other than Legal and medical

Top five job gainers

1. Personnel supply services

2. Eating and drinking places

3. State and local governments

4. Computer and data processing services

5. Offices of health practitioners

Top five job losers

1. Private households

2. Federal government

3. Agriculture

4. State and Local government projects

5. Apparel

Source: U.S. Department of Labor

Sherry Kuczynski is a freelance writer based in Alexandria, Va. She previously worked as a business reporter at Investor's Business Daily in Washington, D.C.