Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Tuesday, May 21, 2013

A service economy needs more time to recover from a recession.

Brad DeLong:
  Martha L. Olney and Aaron Pacitti:
More services means longer recoveries: The four longest recoveries in recent history, as measured by the number of months it took until the economy recovered all of the jobs lost during the recession, also have been the four most recent recoveries—those that followed the recessions of 1981, 1990, 2001, and 2007…. The shift from being a goods-producing, manufacturing-based economy to a service economy… is causing the pace of economic recoveries to slow…. Because services can’t be inventoried nor, for the most part, exported, services are only produced when domestic demand exists.
Goods-producing businesses… can produce in anticipation of increasing demand or in response to increased external demand. Either way, domestic demand need not increase before goods production increases. Service producers are not so lucky. A restaurant won’t produce a meal before you are in the booth. And your dentist can’t produce and inventory a teeth cleaning. You have to be in the dentist’s chair. So service producers must wait…. The greater the share of services in the economy, the greater the share of businesses that must wait for domestic demand to actually pick up…

No comments:

Post a Comment