US economy turning?

Michael Pollak mpollak at panix.com
Thu Jan 3 18:01:24 PST 2002


On Thu, 3 Jan 2002, Doug Henwood wrote:


> There's some evidence in the numbers, not just hopes - higher
> confidence, lower jobless claims, higher manufacturing numbers,
> still-strong house and car sales, a not-as-bad-as-feared Xmas season,
> etc. It's far from conclusive, but there's not much point in denying
> what's there.

What do you think of the theory discussed in the Sunday Times by David Leonhardt that slow recoveries, like the one we had at the beginning of the 90s, will now become the norm rather than the exception because of the differences that come from being a service economy?

<excerpts>

The most basic change is that recessions are less common today than

they were in the 1950's, 60's and 70's. The service sector, which is

less prone to volatile swings than the manufacturing sector, has grown

rapidly, and the Federal Reserve appears more adept at managing the

economy.

But when downturns are infrequent roughly once a decade, rather than

twice the often-overlooked price is that the ensuing recoveries are

neither sharp nor simple. "Because we get smaller downs," said Van

Jolissaint, the corporate economist at DaimlerChrysler (news/quote),

"we also get smaller ups."

<snip>

You cannot store a haircut. That fact goes a long way toward

explaining why the nature of the business cycle appears to have

changed.

When an economy slows, and households and companies start to reduce

their spending, they often cut back most on manufactured goods. A

family gets by with a creaky washing machine for a year more than it

had planned. A business, expecting future sales to be slow, uses up

the goods sitting in its warehouse.

Many services are harder to do without. Consumers cannot keep extra

plumbers' visits on hand or postpone spending on child care. College

tuition, doctor bills and car repairs cannot be put off.

On the other hand, when good times seem to return, people do not get a

few haircuts at a time. They might buy a new television, however, or,

if they run a company, decide to build a factory.

The implications for the economy are obvious: The service sector does

not shrink, or grow, as fast as the manufacturing sector. And the

service sector now accounts for about 80 percent of all jobs in the

United States, up from 60 percent in 1960, as a result of the

country's higher wealth and the move of manufacturing jobs to other

countries.

<endexcerpts>

Complete article at:

Linkname: Recession, Then a Boom? Maybe Not This Time

URL: http://www.nytimes.com/2001/12/30/business/yourmoney/30ECON.htm

Michael

__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com



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