June 6, 2008

WE WERE PROMISED BREADLINES:

A Not-So-Widespread Downturn: So far, the weakness has been largely confined to the housing and automotive sectors—suggesting the economy may be more resilient than it appears (James Cooper, 6/06/08, Business Week)

When the business-cycle experts at the National Bureau of Economic Research define a recession, they say the depth of the decline in economic activity must be "significant" and that it must last "more than a few months." They also say the downturn must be "spread across the economy," and that may turn out to be the most crucial factor in whether or not the current period of weakness ends up being called a recession.

So far, the slump has been unusually narrow, confined mainly to housing and autos. That may explain why broad indicators, such as employment and household income, have not posted typical recession-size declines, and why overall growth has been so resilient in the face of stiff headwinds.

The economy may have more hidden strength than the puny top-line numbers for gross domestic product growth imply. The latest report says the economy grew at annual rates of 0.6% and 0.9%, in the fourth and first quarters, respectively. Help from tax rebates, foreign demand, and lean inventories raise the chances for another small plus in GDP this quarter.

Posted by Orrin Judd at June 6, 2008 7:19 AM
Comments for this post are closed.