06-29-2008
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Vice President
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Member Since: Jan 2004
Location: Los Angeles Ca
Posts: 7,270
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A recession or not??
This is a good article about the current economy. Despite the media hype the current downturn is fairly limited.
Quote:
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.
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.
Strong Service Sector
Digging deeper into the GDP data reveals that recent weakness is sharply skewed toward housing and autos. In the past two quarters, home construction has sunk 25% and 26%, while auto output has dropped 26% and 12%. Excluding these two categories, which make up only 7% of GDP and only 3% of payroll employment, the economy grew 2.8% and 2.5% during the past two quarters. That means 93% of the economy is still motoring along faster than the U.S.'s long-run growth rate, a pattern that was clearly absent in the early stages of the 2001 recession.
One source of that underlying strength is the service sector, which accounts for nearly 60% of GDP. Service GDP rose 3.1% in the fourth quarter and 3.5% in the first quarter. The resulting resilience in service employment, compared with past recessions, explains why overall job losses since the December peak in payrolls have been half the size of declines in the past two recessions.
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Full article here:
A Not-So-Widespread Downturn
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I think at this point there needs to be a focus on an immediate increase in spending and I think this is a time when deficit fear has to take a second seat . . . I believe later on there should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road and recover some of the money."
-- Barney Frank, October 20, 2008
Last edited by Alex; 06-29-2008 at 12:59 PM.
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