"The data that we have on the Dismal Scientist show a manufacturing recession, rising jobless claims, slowing consumption and investment, and wavering confidence. Nonetheless, they also show an unemployment rate of just 4% and still rising hourly earnings. In a nutshell, it's fair to middling."

Dismal Scientist Link

Certainly, one can find evidence of a softening economy in the United States. We are at the downhill side of America's longest peacetime *expansion. Last year, I predicted a post-rollover recession. The American economy, like a supercarrier, has taken more time than I expected to slow down.

The real question is will the economy founder, and if so, for how long? Recent Federal Reserve actions suggest Greenspan has concerns about a sliding economy... enough to surprise the markets with an interest rate cut. The good news is that Greenspan and Bush are unlikely to make the major economic policy blunders that turn a mild recession into something truly ugly. Greenspan will not allow the inflation hawks to choke the economy into submission. Bush does not have enough of an edge in Congress to push major economic initiatives including across-the-board tax cuts.

In the reams of economic information, there is something for everyone. The pessimists can point to record debt levels and rising energy prices. The optimists can talk about strong sustained growth in productivity and continued projections of GDP growth through next few quarters. The shake out in tech stocks has hurt some investors, but was badly needed. Stocks are more appropriately valued and the losses have reminded investors about the importance of earnings.

It's hard to predict what will happen next because the economic data are mixed. Obviously, it is hard to imagine we will be able to continue the torrid pace of economic growth during the past few years. It is also hard to imagine an economy with decent fundamentals plunging into a deep recession... at least not without some serious "help" from policy makers.

Every time it looks like the economy sour, there are a few folks who start harkening back to the Great Depression. The Great Depression was an unusual confluence of economic events, structural weaknesses and horrible decisions by public policy makers. This is not to say America might not have a serious economic downturn at some future point... but I see little evidence to worry about anything more than a mild recession during the next year or two.

-- Ken Decker (kcdecker@att.net), January 12, 2001

Answers

Some down-to-earth advice for individuals on coping with a recession...

"Facing Down the Downturn"

http://abcnews.go.com/sections/business/DailyNews/CopingWithDownturn_0 10110.html

-- (Pr@ctical.advice), January 12, 2001.