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April 21, 2010

The new normal vs the new mix

There's a new term being used to describe the kind of economy we are likely to have in coming years: the new normal. It refers to an economy not in recession but one in which growing very slowly and uncomfortably high unemployment is the name of the game. Is this the accepted view among economists?

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

"It is not among economists. ... In fact, some economists argue that a better description of our future economy -- rather than the new normal -- is the new mix.

"They argue that the major driver of our economic engine is going to change. Gone will be the dominance of consumers and consumer spending. And indeed that is what many economists worry about with consumers not spending as much. That's why they are looking for uncomfortably high unemployment.

"Well, these new thinkers say, 'Yes, consumers are not going to be spending as much as they had in the past, but this is going to be replaced by new drivers.'

"The new drivers will be exports and business spending on investments -- for example, business spending to become more energy efficient and simply more productive.

"And so we are going to still have a consumer-oriented sector, but it is going to be a slow-growing sector. The big pushers in the economy will be business spending and exports, and so jobs will cluster around those latter two -- therefore, the new mix."

Posted by deeshore at April 21, 2010 08:53 AM