The Economy Sucks. But Is It ’92 Redux?
Recessions—defined as a contraction in economic activity—are notoriously hard to predict, especially since they occur so infrequently. Since 1992 the economy has contracted for just eight months, according to the National Bureau of Economic Research, the Cambridge, Mass.-based arbiter of business cycles. Recessions usually occur after a the economy hits a huge speed bump. The commercial real-estate/savings-and-loan implosion precipitated the 1990 recession. In 2001 the bursting tech bubble caused a sharp pullback in business investment.
If the economy teeters into recession this year, it will be because the hardy American consumer—who accounts for 70 percent of economic activity—has finally hit the wall. And when consumers stop spending, the companies that cater to them idle and lay off, which, in turn, leads to more reduced spending.
"Consumers were cautious in their spending at Christmas, and they're going to be cautious going forward," said Rosalind Wells, chief economist at the National Retail Federation. As a result, retailers are acting swiftly to reduce costs and cut their losses. In recent weeks, Talbots announced it would shutter all its Talbots Mens and Talbots Kids clothing stores.
At the dank CompUSA store on Eighth Avenue and 57th Street in Manhattan, a lone security guard checks the bags of the handful of shoppers buying memory cards, cell phones and televisions for 15 to 30 percent off at the store's going-out-of-business sale. "As the days go by it's slowing down a bit," says assistant manager Steve Laureano, who plans to go back to school and seek work elsewhere. The outlet is one of 103 that the chain is closing.
As you've no doubt heard, the trouble started with housing. Defaults on subprime mortgage led to a credit squeeze. After enjoying several years of growth, home prices fell an unprecedented 6.1 percent in the past year. "There's never been a time where you had a real-estate deflation as deep and prolonged as this," says David Rosenberg of Merrill Lynch.
In the most recent recession, 2001, the areas hardest hit were those that had benefited most from the technology boom—San Francisco, Boston and Austin, Texas. Today, former housing hot spots like California are functioning as cement shoes for the national economy. John Harmer, co-owner of Southland Lumber & Supply of Inglewood, Calif., says his business is off 50 percent this year. After being hit by a slowdown in sales to home-remodeling contractors, his 18-employee firm, which also supplies materials to the sets of television shows like "Boston Legal" and "Nip/Tuck," was nailed by the entertainment writers' strike. "TV is out completely," Harmer says. So far, 10,500 Hollywood workers have been laid off since the strike began, says Jack Kyser, chief economist of the Los Angeles County Economic Development Corporation.
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Member Comments
Posted By: Davemathes @ 01/20/2008 3:17:20 PM
Comment: It is once again the"Economy Stupid" and both parties better get that soon. In light of the Republican stupid responses (Cut taxes again for the rich and make the Bush taxes permanant) they clearly show they don't get it. The Democrats numbers are just as bad. We need alot more than ashort time $800 per person break to take care of the economic problems that will bring us down in the next year. Both the Obama solution and the Clinton solution are not enough to shake the problem when forclosures continue, mortgages become impossible to get and insurance companies that back debt can't pay off. This is the BUSH recession!
Posted By: ObamaMama @ 01/17/2008 5:53:55 PM
Comment: Thanks for contributing this knowledge! Kudos to writer Andrew Romano/ Stumper/ "The Race War" and his unbiased presentation of remarks during the course of several days. Closes with something like, "You decide....'" The campaign tactics attack dogs unleashed by the Clinton camp on Senator Obama give every indication of HER STATUS QUO:dirty politics as usual, including reaching to the most experienced in that vein. EXACTLY OPPOSITE of how Senator Obama hopes to mend the great American divide. Mrs. Clinton's initial announcement: "I'm in it to win it.'", supported by suing over caucuses in Nevada is a bellwether of their tactics. Remember, No matter where you go, there you are!!! Senator Obama, showing true leadership qualities, was first to announce a "truce" of sorts to the remarks. FIRST. And he has Americans in mind FIRST, not a private agenda. Mrs Clinton has copied "change" and "American" from him. But there's one thing that won't change: her, her motives, her vendetta. She's very feeble about LBJ. The efforts of a nation and its movement led by Dr. Martin Luther King and other passionate supporters, and wholly supported by the Kennedy administration left LBJ little more than to sign off on it, something he himself acknowledged. And if she can't take the heat in the kitchen, she needs to get out!!! The Clinton camp is the one with "'Open mouth, insert....' " (You decide.) HER camp is having to backtrack, put spin on badmouth comments. Senator Obama embodies very positive leadership qualities and abilities. He is particularly EXPERIENCED in thinking before speaking, and his clearcut concern is to run a very ethical campaign. Intelligent voters don't choose a candidate based on ONE factor: (like I'm a woman). Both Senator Obama and Mrs. Clinton have provided the public insight into how they personally deal with events, remarks, issues! WATCH!!!!
Posted By: stanjz @ 01/16/2008 7:23:37 PM
Comment: History has been overtly generous to the Clintons in what it perceives they have done for the poor.
Federal Minimum Wage Bush one-April 1991 $4.25
Clinton-October 1996 $4.75 Clinton-September 1997 $5.15 You don't close the gap between the rich and poor with a .90 /hr raise over 8 years!
???The income gap actually grew more during the Democratic Clinton administration than it has during the Bush administration. According to U.S. Census data, the share of income for the wealthiest 5 percent rose from 18.6 percent in 1992 to 22.1 percent in 2000. That???s a jump of almost 19 percent.???
Furthermore, capital gains tax was only 20 percent during the Clinton Presidency. That means the super rich only paid 20 percent on their income from the stock market. Actual wage earners would pay up to 38 percent. Most CEO???s get paid through stock so they only pay 15% tax now and 20 % back then. The Clinton???s never indexed the minimum wage to inflation like Barack Obama wants to, so the poor immediately saw inflation eat away at their small gains.