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The Grass Is Greener on Some Sides
| Article
# : |
19905 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
4 / 1992 |
1,518 Words |
| Author
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James F.smith
James F. Smith is professor of finance in the graduate school
of business administration at the University of North Carolina
at Chapel Hill. He was a consultant to the president's Council
of Economic Advisers and is former president of the National
association of Business Economists. |
The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the group that determines the month in which expansions and recessions end or begin, has decided that the expansion that began in November 1982 ended in July 1990. This was the longest peacetime expansion in the history of the United States, breaking the previous record set in 1790-96, during the Washington administration.
Throughout the course of this record expansion, it was frequently observed by many economists that a series of "rolling readjustments" was keeping economic growth going. By this phrase, analysts meant that just when one group of industries and certain parts of the country were slowing down from a phase of rapid growth, other industries and other regions were taking over as leaders.
Innumerable articles on the "bicoastal economy" were written early in the 1980s. If your state bordered saltwater, it was doing very well, but you were in trouble if you lived in the mid-western "Rust Belt" or the agricultural heartland. After oil prices collapsed in 1986, Texas, Louisiana, and Alaska (along with Colorado and Oklahoma) fell on hard times. As the dollar weakened against most European currencies and the yen, midwestern manufacturers and agricultural exporters took up the lead. The United States managed the neat trick of always having some industries and some states lagging badly while always having enough growth to keep national expansion going.
By 1990, 32 states were experiencing financial distress, and that finally pushed the United States into an official recession. While the NBER has yet to meet to determine the timing of the end of the 1990-91 recession, most economists expect it will eventually decide on March, April, or May 1991. Those three months mark the troughs of industrial production and nonfarm payroll (establishment) employment. Growth in the total economy--gross domestic product (GDP) in 1987 dollars--has been positive ever since the first quarter of 1991, but it has been very slow. Real GDP fell at an annual rates of 2.4 percent, 1.8 percent, and 0.3 percent in the three succeeding quarters.
This growth has differed widely when viewed from the perspective of the individual states. This should not be too surprising. No state can grow faster than the national average forever, for if it did, it would eventually become the entire country. This does not mean that states cannot grow faster than the national average for a long time; they just can't do it forever.
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