A weak recovery?

Louis Proyect 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
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 
followed downturns.

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 
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."


Louis Proyect, lnp3 at panix.com on 12/30/2001

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