The mainstream media has a knack for dwelling on the negative, especially concerning the economy. When billionaire investor Warren Buffet noted last month the U.S. is “essentially” in a recession, it made headlines. At the same time, an economic forecast by the University of California concluding the country will avoid recession and the World Economic Forum’s ranking of the U.S. economy as the most competitive in the world, were overlooked or buried.
I’m no fan of Pollyanna-style optimism, and I’m not entirely convinced the U.S. economy will dodge a recession, but I do think some perspective is in order. To be sure, our economy is facing serious hurdles. The housing crisis and resulting credit crunch are affecting almost every sector, including the aftermarket.
When talking heads mention the “r-word,” it’s usually with a grave air, as if recession is the beginning of a downward spiral that will end in economic collapse. History and a basic understanding of capitalistic economies tell us otherwise. Recessions are part of the normal economic cycle, and they’re temporary. For those of us in the trucking industry, we know all to well how cyclical business can be.
In fact, evidence shows economic slumps are milder and shorter than in the past. The U.S. economy was in recession only 6 percent of the time between 1986 and 2007, compared to 18 percent of the time between 1963 and 1985, according to the National Bureau of Economic Research. Reasons for this include a larger service economy, increased government spending and just-in-time inventory, writes Ken Kaszak, a representative with Investors Capital Corp., in a Pittsburgh Post-Gazette column.
From a global standpoint, the U.S. economy is far from sinking. I was intrigued by a map sent to me by Truck Parts & Service guest columnist Bill Wade that compares the gross domestic product of the 50 U.S. states to the GDP’s of other countries. It can be found on “The Big Picture” website of economist Barry Ritholtz of Ritholtz Research and it shows our economy is as big as the next-four-largest economies – Japan, Germany, China and the United Kingdom – combined. Also of interest, California’s economy is approximately the size of France’s and it would be the eighth-largest economy in the world if it were a nation instead of a U.S. state. Illinois’ economy is approximately the size of Mexico’s, Ohio and Australia have comparably sized economies and Tennessee’s gross state product is about the same as Saudi Arabia’s GDP.
Downturns create pent-up demand, which gives way to expansion, and the economic cycle starts over. The demand building now will mean a lot of extra freight to be delivered when the downturn breaks. Most analysts predict a freight upturn to begin later this year or early next year. When that happens, be ready for the record number of trucks out there to require a record amount of parts and service.
