A weak recovery?
lnp3 at panix.com
Sun Dec 30 10:01:07 MST 2001
NY Times, December 30, 2001
Recession, Then a Boom? Maybe Not This Time
By DAVID LEONHARDT
In decades past, the next step for an American economy in recession
would be clear. It would boom.
People would start spending again, and companies would quickly
increase production, creating hundreds of thousands of jobs and
fattening paychecks. In a quickly widening spiral, these developments
would lead to even more spending.
But the rules for recoveries may well be different today not
because of Sept. 11, but because of fundamental changes in the
economy. Even after a year-end flurry of good news on home sales,
consumer confidence and jobless claims, the recovery likely to start
in 2002 could be far weaker than those in other years that have
A limited rebound would have a broad impact on the way people live
and businesses function, whether because unemployment stays high,
corporate earnings continue to be sluggish or the stock market is
slow to rebound. It could also shape much of the political debate
leading into the midterm Congressional elections.
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
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."
Louis Proyect, lnp3 at panix.com on 12/30/2001
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