The Longest Boom

The 9-year `Goldilocks' expansion was born of high technology and low inflation, though wages barely rose for most Americans.

January 30, 2000|By Kristine Henry and Bill Atkinson | Kristine Henry and Bill Atkinson,SUN STAFF

Ruth Nophlin doesn't need Alan Greenspan to tell her about the economy. She has lived it.

In four years, the 43-year-old Northeast Baltimore woman has gone from being thrown out of a job when London Fog moved its manufacturing operations overseas to taking computer classes to working as an office supervisor for a Towson technical training company. Now, she has more work than she can handle and earns more money than she ever has.

Part of the credit for her recovery goes to Nophlin's resilience. But part of it belongs to the flourishing economy.

The expansion is entering its 107th month and shows no signs of abating. It will be 9 years old March 1, and will become the longest in U.S. history Tuesday.

The boom has been described by some as nothing less than an American revolution, not just because of its duration but because of what it has produced: a new world of technological advances, leaps in productivity, a soaring stock market, record consumer spending and confidence.

It has spawned nimble companies that are capable of responding to marketplace and competitive pressures quicker than ever before. And it has rekindled an entrepreneurial spirit that many thought was dead and opened the doors to financial success to women and members of minority groups. At the same time, the country has enjoyed record unemployment, rock-bottom interest rates and historically low inflation.

Since the recovery began, 20 million jobs have been created and 6 million homes have been built. More than 115 million new vehicles have been purchased, along with 5 million boats, 80 million cell phones and 175 million personal computers. Money has flowed into bank accounts like champagne into glasses at a New Year's Eve party. A million people have become millionaires during this expansion.

"It is basically Atlas unchained, capitalism at its rawest. The entrepreneurial spirit really does seem to be creating tremendous prosperity," said Edward Yardeni, chief economist and global investment strategist at Deutsche Bank in New York.

Despite the remarkable advances, not everyone has been a beneficiary of the economic expansion, which is expected to break the record set between 1961 and 1969.

Hundreds of thousands of workers -- white- and blue-collar -- lost jobs, wages for workers have not increased at the same rate as corporate profits or compensation for top management, and the gap between rich and poor has widened.

Still, few dispute that the expansion has been nothing short of incredible.

"In a sense we really have moved through an economic revolution that has been every bit as significant as those defining events of the past -- whether it is the automobile or the development of the highway system," said J. Patrick Bradley, director of economic and investment research at Mercantile-Safe Deposit & Trust Co. "I think it is every bit as defining as that. I am amazed, I am fascinated."

Born in a recession

The recovery was born from the ashes of the short but brutal recession of 1990.

Banks and savings and loans, the barometers of the economy's health, failed by the hundreds, consumers spent little, and the commercial real estate industry collapsed.

American businesses, fat and sluggish, lost their competitive edge. People wondered aloud whether the American dream was dead.

Japan crowed about being the world's pre-eminent economic power, and few disputed the claim. Even Federal Reserve Chairman Alan Greenspan felt Americans' despair.

"There is a deep-seated concern out there which I must say to you I have not seen in my lifetime," he told the House Ways and Means Committee in December 1991.

That was actually nine months after the recovery had begun. But people didn't believe things were getting better. The gloom was so ingrained that it took nearly two years before the public cautiously accepted the notion that the economy was on the rebound.

New word: `downsize'

Their hesitancy wasn't surprising. A new word had entered Americans' lexicon in the early days of the recovery -- "downsize."

It was a sterile word that corporations preferred to use instead of "firing." Nevertheless, the result was the same: Workers lost jobs. And in the early 1990s, the layoffs were massive.

In December 1991, General Motors Corp. announced plans to close 21 plants and slash its work force by 74,000. International Business Machines Corp. said a year later that it would cut 25,000 jobs worldwide. In January 1993, Sears, Roebuck & Co. said it would cut 50,000 jobs and close 113 stores.

Those made the headlines. But it seemed every company, large and small, was doing the same thing. And if they weren't, their employees feared they would.

Unemployment, which stood at 5.6 percent in 1990, vaulted to 6.8 percent in 1991, and 7.5 percent the next year.

"It was very bleak," Bradley said. "There was fear you could possibly lose your job through downsizing. It took a long time before this expansion took hold in people's minds."

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