Tuesday, June 10, 2008

The True State of the Economy -- and Does it Really Matter?

In its Business Outlook column, "A Not-So-Widespread Downturn: So far, the weakness has been largely confined to the housing and automotive sectors—suggesting the economy may be more resilient than it appears," from this week's BusinessWeek, James Cooper wrote -- well, the headline says it all.

Except I don't believe it.

Cooper, a senior editor and senior economist who writes the Business Outlook column, is no doubt a very smart, accomplished person.

But his conclusion doesn't feel right to me.

I don't know anyone who feels the downturn has been contained.

He says the economy shows strength in "the service sector, which accounts for nearly 60% of GDP."

I don't know anyone in the service sector who feels unaffected by the downturn.

Could it be the escaping-gravitational pull of the oil prices, which last week jumped up more than $11? (The largest single-day jump on record according to CNN.) Or that gas in the U.S. now averages more than $4/gallon?

I hope Cooper is right, and that my opinion is just a matter of "truthiness." (But check out the Wall St. Journal article on gas prices, "Gasoline Hits Average of $4 a Gallon: Price Shock, AMong the Worst in a Generation, Will Worsen the Risk of Recession.") I posted similar comments to the article here.

I don't believe anyone reading this blog is unfamiliar with truthiness, but in case you are, check out this video explanation.

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