Word: slowdown
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...When this slowdown is over - and with the Fed cutting interest rates at a furious pace, the markets showing signs of life, and large parts of the economy showing surprising resiliency, it's not likely to last the year - productivity growth should go back on the uptick. And the linchpin of the New Economy will be back in force...
...even if this slowdown lasts for 10 years, 2.4 percent a year falls rather neatly into the Congressional Budget Office's admirably conservative economic projections that it plugs into its surplus forecasts. Heck, compared to the pre-New Economy years, before office technology and Internet efficiencies started to infiltrate Old Economy businesses, it's pretty darn good...
...meantime, we're in a temporary slowdown - maybe six months, maybe nine, maybe a recurring, malaria-type thing that happens every time a NASDAQ bubble bursts. But if the surplus projections turn sour a few years down the road, it'll likely be the politicians' fault...
...service sector - from restaurant workers to mall cashiers - is still doing fine. And if they're hiring, then people are still getting out and spending money. Consumer spending accounts for two thirds of the U.S. economy, and it's a big factor in the intensity of any slowdown. So although consumers' expectations of the next six months are pretty bleak, as we saw in this week's consumer confidence index report of January, that pessimism isn't showing up with nearly as much force in their day-to-day activity. (Exhibit B: Surprisingly strong January car sales...
...slowdown is still very much on, and the Fed is still very worried about a recession. But new home sales are rising, mortgage rates are falling, and record rates of mortgage refinancing promise to keep pockets filled. Even as consumer confidence plummets, consumer spending has been holding steady, and there apparently wasn't much perceived downside to moving just a little slower than the lead bears this time around...