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U.S. Slowdown Often Hard to Detect
By Michael McKee
Washington, Feb. 6 (Bloomberg) -- Dennis Beaudry hasn't had much time to read the weekly news magazines declaring the U.S. is in an economic slump. The Las Vegas, Nevada, building inspector says he's just too busy.
The city's growth is ``explosive,'' Beaudry said. ``You drive down the street and all of the sudden there's a new building that wasn't there a week ago.''
Lisa Ventriss, an insurance industry executive in Burlington, Vermont, shrugs off talk of recession. ``We don't think there's a lot of doom and gloom to get concerned about,'' she said. ``The Vermont economy right now is very strong.''
While there's no question the record U.S. economic expansion has lost steam approaching its 10th anniversary next month, Americans remain optimistic about the outlook. Many are adjusting to the problems brought by growth.
The unbroken stretch of prosperity since March 1991 has pushed up housing prices, worsened traffic and pollution, and caused schools to overflow. A nationwide shortage of workers has boosted wages and salaries. The resulting inflation threat caused Federal Reserve policy makers to raise interest rates six times between June 1999 and May of last year.
Needing `A Breather'
The Fed, concerned it had caused the economy to slow too much, started to reduce borrowing costs last month. Nationally, unemployment rose to a 16-month high of 4.2 percent in January. Still, that's higher than the jobless rate in 32 of the 50 states.
``I don't think anybody would say we need a recession, but it's probably wise if we have a breather,'' said Alan Day, investment manager of the Stratevest Group in Burlington. ``The economy was really jumping in New England as well as the rest of the country. And we just can't keep going on and on like that.''
Worries are deepest in older auto, machinery and steel producing states that border on the Great Lakes, the most sensitive region to swings in U.S. and foreign spending and where past recessions did the most damage. The South, losing its dependence on low-skilled manufacturing such as textiles, will probably see its jobless rate increase without exceeding the U.S. average, economists say.
Rust Belt Anxieties
Business investment indeed did fall in the last quarter of 2000 to the slowest pace since 1992, while consumer spending dwindled in recent months, government and private statistics show. The Fed cut the nation's benchmark interest rate by a full percentage point last month to keep the expansion on track.
Such turmoil is creating understandable anxiety in Rockford, Illinois, where unemployment reached 25 percent in the 1981-1982 recession. The Labor Department reported last week that the U.S. lost 65,000 factory jobs in January, more than 250,000 since June. One in three jobs in Rockford is directly or indirectly linked to manufacturing.
While headlines about the possibility of recession have taken a toll on consumers' outlook for the next six months, confidence surveys show people think their own circumstances aren't too bad.
`I don't see any indication at this time of a recession,'' said Iowa Governor Tom Vilsack, a Democrat.
Builders Seek Workers
University-backed development of biotechnology and a flow of immigrant workers have boosted prospects for his state, which until recently had been losing population for decades.
At the Hopkinton, Massachusetts, headquarters of EMC Corp., the largest maker of large data storage systems, company officials say they're confident about future business investment.
``I have been quite surprised by the amount of discussion about a slowdown,'' said Michael Ruettgers, EMC's chief executive officer. EMC reported last month that its fourth-quarter profit rose 49 percent.
Many companies still worry about a lack of workers. While problems with seasonal adjustments may have had an influence, the Labor Department says builders hired an unprecedented 145,000 workers last month.
`It's very difficult for us to find subcontractors, carpenters and tradesmen,'' said Mark Lords, vice president of the Snyder Companies, a Burlington builder. ``We have to pay more; it costs more to build. We have artificially high housing prices. And that makes the cost of living high.''
Americans are also taking a critical look at growth.
Since 1996, developers in Clark County, Nevada, have carved an area the size of San Francisco out of the desert around Las Vegas. Almost a 10th of the quarter-million new homes built in the West in 1999 were added in Las Vegas.
A Short Slump
Because of that, Clark County schools must absorb 15,000 new students a year and build almost two schools a month to keep pace with population growth, officials said. A slowing economy will save them money.
``When contractors or subcontractors are more available, that's going to be reflected in the bid prices,'' said Fred Smith, construction manager for the Clark County School District.
Technology industries such as fiber optics and contract manufacturing of electronic components will help the South thrive. Foreign-based automakers with plants in the U.S. South haven't suffered the sales decline that the U.S. companies have.
``The region is better positioned than the nation,'' said Mark Vitner, economist at First Union Securities in Charlotte, the second-largest banking center in the U.S. The region provided four out of 10 new jobs in the U.S. in the past decade.
Many economists say any slump will be short.
``Our forecast, which we still believe will be accurate, is that after 2001, growth will begin to pick up again, because the underlying economy is very sound,'' said Alan Clayton-Mathews, president of the New England Economic Project, a business- government-academic consortium.
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