Word: slowdowns
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...economists surveyed by the Blue Chip Economic Indicators holds that the economy will grow at a rate of less than 1.5% during the final half of the year and at about the same sluggish pace in 1990. Says Norman Robertson, chief economist at Pittsburgh's Mellon Bank: "The slowdown is now a reality. It has arrived." Two out of three of the Blue Chip forecasters expect that the economy will fall into a recession by sometime next year...
Despite concerns that the expansion will falter, most economists believe a modest slowdown is necessary to suppress inflation, which had grown particularly stubborn in the past two years. Consumer prices rose at an annual rate of 5.9% during the first half of 1989, up from 4.1% last year. "The economy was running too fast for its own good," says Francis Schott, chief economist for Equitable Life Assurance. "It was working itself up to an inflationary frenzy...
...dollar reflected fears of recession. The Federal Reserve Board appears ready to spur the economy by letting interest rates fall, but that could further undermine the dollar by making U.S. investments less attractive to foreigners. Unemployment reached 5.3% in June, up from 5.2% in May, another sign of a slowdown...
...conflicting advice it is getting, the Fed may be steering an astute political course. "Politicians know that it's better to have a slowdown now than during the 1990 election," says John Makin, director of fiscal-policy studies at the American Enterprise Institute in Washington. And while the experts may agree on little else, most say the economy will remain in precarious health until Congress and the White House devise a realistic plan to cut the budget deficit. That will take some doing. When a perplexed Pharaoh awoke from his dream-filled sleep, Joseph advised the ruler to store food...
...answer lies in the contrary way that economists have come to view the world during the long expansion of the 1980s. Instead of bemoaning the big leap in the number of unsuccessful job seekers, the experts cheered it as a sign of a slowdown that lessens the chance of a new burst of inflation. "No matter how bad the news," observes Pierre Rinfret, a Manhattan-based economic consultant, "the market will find something good in it." Just as the market, which seems to obey none of the usual rules, almost always manages to find something bad in the very best...