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July 11, 2008

Why the slowdown isn't worse

Many analysts are trying to figure out exactly what condition the economy is in. Clearly, the housing and auto markets are in an upheaval. But how is the rest of the economy doing? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"This economic slowdown - and we don't yet know if it's a recession - has really been perplexing to economists because, actually, if you look at it in terms of the broad numbers, clearly we're not doing as well as we did a year or two years ago. But in terms of slowdowns, we're actually not doing that badly. And I think one reason is that most of the problems have been confined to the sectors we mentioned: housing and autos. So if you look at the economy outside of housing and autos, it's actually growing at a 4 percent rate, which is as high as any time in the last four years. I think there are two factors behind this good news. One is the export market. The export market is booming because of the low-value dollar. It's really helping our factories; factories would be in much worse shape if it weren't for the export market. And then secondly, most businesses have learned to keep inventory very low. Computers have helped in that regard. So that means when there is a slowdown, they don't have to send as many people home because they don't have to sell out of inventory. So I think the strength of the economy outside of housing and autos is one reason why many economists who look at these numbers say, well, the economy's actually doing fairly well, and job losses - again relatively - have been fairly light during this turndown."

Posted by Dave at July 11, 2008 08:00 AM