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Economic Situation

U, V or W for recovery IT HAS been deep and nasty. But the worst global recession since the 1930s may be over. Led by China, Asia’s emerging economies have revived fastest, with several expanding at annualised rates of more than 10% in the second quarter. A few big rich economies also returned to growth, albeit far more modestly, between April and June. Japan’s output rose at an annualised pace of 3.7%, and both Germany and France notched up annualised growth rates of just over 1%. In America the housing market has shown signs of stabilising, the pace of job losses is slowing and the vast majority of forecasters expect output to expand between July and September. Most economies are still a lot smaller than they were a year ago. On a quarterly basis, though, they are turning the corner. This is good news. The first step in any recovery is for output to stop shrinking. But the more interesting question is what shape the recovery will take. The debate centres around three scenarios: “V”, “U” and “W”. A V-shaped recovery would be vigorous, as pent-up demand is unleashed. A U-shaped one would be feebler and flatter. And in a W-shape, growth would return for a few quarters, only to peter out once more. Optimists argue that the scale of the downturn augurs for a strong rebound. America’s deepest post-war recessions, they point out, were followed by vigorous recoveries. In the two years after the slump of 1981-82, for instance, output soared at an average annual rate of almost 6%; and this time round, output has slumped even further, and for longer, than it did in the early 1980s. Pessimists, meanwhile, think this downturn’s origins favour a weak recovery or a double-dip. Unlike typical post-war recessions this slump was spawned by a financial bust, not high interest rates, and when overindebted borrowers need to rebuild their balance-sheets and financial systems need repair, growth can be weak and easily derailed for years. Japan’s 1990s banking crisis left the economy stagnant for a decade; a premature tax increase in 1997 plunged it back into recession.

• August Economic Summary in Graphs , Data Points to Ongoing Economic Woes
• U.S. private sector sheds 298,000 jobs in August, ADP Reports 298,000 Jobs Shed in August
• Weekly Unemployment Claims: Stuck at High Level
• 1.3 million to lose jobless benefits by year's end
• Study: unemployed feel 'traumatized' by recession
• Retailers report sales declines for August, Weak Back to School Sales
• ISM Non-Manufacturing Index Shows Contraction in August
• Roubini Project Syndicate Op-Ed: A Phantom Economic Recovery
• Will the Fall Economic “Holiday Celebrations” Come Early this Year?
• The answer is yes, recoveries ain’t what they used to be, Some call it recovery
• The Statistical Recovery , Data Points to Ongoing Economic Woes,The Statistical Recovery, Part 2
• The Statistical Recovery, Part Three
• Realities vs Rhetorics: Economy, Policy, Real Data (Updates)
• Consumer Spending in U.S. Probably Decelerated in July as Payrolls Dropped
• ECB Warns of `Bumpy Road Ahead' as Officials Signal No Stimulus Exit Soon
• Central Bank Warns Europe of a Patchy Recovery
• Eurozone Stays in Recession... Producer Prices Continue Collapse

Existing Home Sales Far Worse Than Advertised The latest housing consensus as sung in three part harmony amongst the media and green shoots crowd. Their song gores something like this: 1) The worst of the housing trouble is now behind us; 2) Only recently, Housing was “Getting worse more slowly;” 3) That has  transitioned to “Housing is getting better.” I don’t believe it. IMO, all 3 are misleading or outright wrong. This post explains why. On Friday, the market rallied smartly –  and while expiry had something to do with it, the larger part of the gains came after the release of the Existing Home Sales data. Traders’ kneejerk reaction seemed to reflect the belief that not only is the worst of Housing now behind us, but that Housing was actually getting better. Indeed, Housing is going to be a growth driver for the economy going forward!Only, not so much. A close look at the data reveals this to be a false premise.

• Existing Home Sales increase in July , More on Existing Home Inventory
• The housing recovery mirage
• Troubles For 'Prime' Borrowers Intensify
• * A comment on House Prices (a MUST READ)

Commercial Real Estate Portends Crisis Federal Reserve and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat. Their efforts could be undermined by a surge in foreclosures of commercial property carrying mortgages that were packaged and sold by Wall Street as bonds. Similar mortgage-backed securities created out of home loans played a big role in undoing that sector and triggering the global economic recession. Now the $700 billion of commercial-mortgage-backed securities outstanding are being tested for the first time by a massive downturn, and the outcome so far hasn't been pretty. The CMBS sector is suffering two kinds of pain, which, according to credit rater Realpoint LLC, sent its delinquency rate to 3.14% in July, more than six times the level a year earlier. One is simply the result of bad underwriting. In the era of looser credit, Wall Street's CMBS machine lent owners money on the assumption that occupancy and rents of their office buildings, hotels, stores or other commercial property would keep rising. In fact, the opposite has happened. The result is that a growing number of properties aren't generating enough cash to make principal and interest payments. The other kind of hurt is coming from the inability of property owners to refinance loans bundled into CMBS when these loans mature. By the end of 2012, some $153 billion in loans that make up CMBS are coming due, and close to $100 billion of that will face difficulty getting refinanced, according to Deutsche Bank. Even though the cash flows of these properties are enough to pay interest and principal on the debt, their values have fallen so far that borrowers won't be able to extend existing mortgages or replace them with new debt. That means losses not only to the property owners but also to those who bought CMBS -- including hedge funds, pension funds, mutual funds and other financial institutions -- thus exacerbating the economic downturn.

• Construction Spending in July

Study: unemployed feel 'traumatized' by recession A new study finds that the recession has left many jobless workers struggling to cope with the psychological stress caused by becoming unemployed in a weak economy. Researchers at the John J. Heldrich Center for Workforce Development at Rutgers University said the financial strain that comes with being out of work combined with the sometimes daunting task of seeking new employment in a difficult job market has left many Americans "traumatized." Zukin said "significant numbers" of respondents have had trouble sleeping since losing their jobs, have strained relations with family members and increased alcohol and drug dependency. Many also say they now avoid social situations. The report released Thursday is based on a survey of 1,200 Americans who have been unemployed and looking for a job for the past 12 months. Two-thirds of respondents reported being depressed. More than half said they have borrowed money from friends or relatives. One quarter said they have skipped mortgage or rent payments. Meanwhile, just 40 percent received unemployment insurance, and 83 percent of those who got aid said they're concerned the benefits will run out before they find a job. Half said they didn't have health insurance. The survey found 60 percent of the recently unemployed lost their jobs without warning, while just 15 percent got some type of severance and almost none were offered retraining. More than half lost their jobs for the first time, while 40 percent had held the same job for three or more years. "The jobless have had to face the fact that their old jobs, incomes, and work identity are gone," Zukin said. Job loss also has hit more affluent workers and educated professionals hard, the survey found. More than a quarter of those unemployed for the first time earned $75,000 or more a year. "This is not your ordinary dip in the business cycle," said report co-author and Rutgers professor Carl Van Horn. "Americans believe that this is the (Hurricane) Katrina of recessions. Folks are on their rooftops without a boat. The water is rising, and many see no way out."

• Job Growth Lacking in the Private Sector, Private Sector Employment Growth

States Shut Down to Save Cash  Across the country, cash-strapped state governments are shutting down business for a day at a time to save money. State offices are shuttered Friday in California, Maine, Maryland and Michigan. Rhode Island had planned to join them until a judge on Thursday blocked its closure plan. Some state agencies are closed in Georgia and Wisconsin, and most Colorado state offices will be shuttered on Tuesday. Other states, such as Arizona, have been trying to keep their operations open while furloughing thousands of workers. So far the effect of furloughs appears to have been muted, with most people able to take care of state business in advance of closures or by filing forms online. The furloughs, which basically act as salary cuts for state workers, are the latest response to plunges in tax revenue because of the recession. State legislatures have struggled to cover shortfalls that have ballooned to $168 billion, or 24% of their general-fund budgets, for the current fiscal year, which for most began July 1, according to a report released Thursday by the left-leaning Center on Budget Policy Priorities. Consumers have reined in spending, eroding sales-tax receipts, while job losses have cut income-tax collections. States have already responded by raising fees and tapping rainy-day funds, and are now forced to deal with wage costs, which make up about 13% of their budgets, according to the Rockefeller Institute of Government in Albany, N.Y. For political and practical reasons, states have been reluctant to lay off workers, policy analysts said. Instead, furloughs have become the hot trend in budget management, in part because the savings are "easy math" to state officials, said Scott Pattison, executive director of the National Association of State Budget Officers.

• Budget Cut Impact Graphic, State Budget Gaps Chart

An Echo Chamber of Boom and Bust …the business cycle is tied to feedback loops involving speculative price movements and other economic activity — and to the talk that these movements incite. A downward movement in stock prices, for example, generates chatter and media response, and reminds people of longstanding pessimistic stories and theories. These stories, newly prominent in their minds, incline them toward gloomy intuitive assessments. As a result, the downward spiral can continue: declining prices cause the stories to spread, causing still more price declines and further reinforcement of the stories. At some point, of course, the process must end, as when the market falls so low that it becomes enticing, or when new stories emerge. Similarly, an upward movement in stock prices generates its own upward feedback. At first, the feedback explanation may sound too simple, and may suggest that the stock market and its turning points are easy to predict. But because day-to-day noise shrouds these changes, and because the stories change in their retelling and as new evidence emerges, the process is actually very complex. And even when feedback mechanisms are straightforward, they can produce very strange outcomes, not predictable very far into the future, as the modern mathematics of chaos theory can attest. Still, when there is a change in the economy, it is worth seeking some sense of what actually happened. We should be able to look back at the recent swings and get some idea, after the fact, of what caused us to change our stories and mind-set. All of this suggests that a social epidemic is supporting renewed confidence. This confidence can keep growing by contagion, as a kind of self-fulfilling prophecy, and we may see the markets and the economy recover further. But in an economy that is still unstable, the stories could also morph into different forms, the price feedback could turn downward and the dynamic could turn ugly again — just as it has in the past.

Clarida Sees 2% Growth as `New Normal' in U.S. Recovery: Audio  (Bloomberg) -- Richard Clarida, a strategic adviser at Pacific Investment Management Co., and Jason Trennert, chief investment strategist at Strategas Research Partners, talk with Bloomberg's Tom Keene and Ken Prewitt about the U.S. economy, prospects for higher taxes and government spending. possible candidates for acquisition.

• Another Jobless Recovery, Even with a Deficit Spike

Policy and Politics

Fed official: rates to be kept low past upturn Financial markets have not fully understood that the U.S. Federal Reserve's pledge to keep interest rates exceptionally low for an extended period means they will stay low beyond when officials normally would raise them, a top Fed official said on Friday. "I don't think markets have really digested what that means," St Louis Fed President James Bullard said in an interview. The Fed's strategy is aimed at promoting a future rise in inflation, which should provide an immediate boost in activity in anticipation of a future boom, but that hasn't happened, Bullard said. The St. Louis Fed official's comments suggest the Fed will be in no hurry to raise rates when signs of an economic rebound take firmer hold and that the central bank will be willing to tolerate higher levels of inflation over the short term as it nurses the ailing economy back to health. Bullard said purchases of long-term securities by the central bank have successfully expanded the monetary base -- the amount of money in the economy. Expanding the monetary base has diminished risks from deflation in 2009, he said. However, the effect of those long-term purchases in lowering borrowing costs is more ambiguous, Bullard said. The Fed's announcement of those programs brought interest rates down, but those rates rose again, he said. Many analysts worry that the Fed's aggressive policies to revive the economy are sowing the seeds for a spike in inflation. With its vast expansion of money in circulation, the Fed is thinking about how it can effectively take money out of circulation by paying banks interest on the reserves they hold at the central bank, Bullard said. If the rate it pays is high enough, banks will keep reserves at the Fed and the money will not fuel unwanted inflation by sloshing around in the economy.

• Volcker Urges Bank-Like Rules for Money Funds to Protect Financial System
• Bernanke Named to Second Term at Fed After Keeping U.S. Out of Depression
• Us and them: Reviewing central bank actions in the financial crisis

Fed study puts ideal interest rate at -5% The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve's last policy meeting. The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation. A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent. Fed staff separately estimated what size and type of unconventional operations, including asset purchases, might provide this level of stimulus. They suggested that the Fed should expand its asset purchases by even more than the $1,150bn (€885bn, £788bn) increase policymakers authorised at the last meeting, which included $300bn of Treasury purchases. The assessment that the US central bank needs to provide stimulus equivalent to a substantially negative interest rate is unlikely to have changed ahead of this week's policy meeting.

• Liquidity preference, loanable funds, and Niall Ferguson (wonkish)
• Dark Age of macroeconomics

• Posen Says Central Banks `Largely Right' on Policies: Audio (Bloomberg) -- Adam Posen, deputy director of the Peterson Institute for International Economics, and Richard Clarida, a strategic adviser at Pacific Investment Management Co., and talk with Bloomberg's Tom Keene and Ken Prewitt about central banks' monetary policies during the financial crisis and the U.S. economy.
• DMJ’s Jones Says Innovative Fed Prevented U.S. Disaster: Audio  (Bloomberg) -- David Jones, chief executive officer of DMJ Advisors LLC in Denver, talks with Bloomberg's Tom Keene and Ken Prewitt about the U.S. recession, the credit crisis and Federal Reserve monetary policy.

Basic Math for the Math Challenged Since Richard Posner has decided to exhibit his math skills again, I thought it useful to work through some math to see how one can obtain back-of-the-envelope estimates for the stimulus package. I'll use Mr. Posner's numbers to illustrate. Stipulate that $89 billion in stimulus funds were expended (this is Economy.com's estimate), in combined tax rebates, transfers to support state spending on goods and services and transfers, and direct Federal spending. This is higher than the $60 billion cited by the IMF (page 6), but lower than the $100 billion cited by Dr. Romer in her study (where she used IRS information on tax cuts; as Donald Marron has pointed out, Recovery.gov reports only expenditures on goods/services and transfers). Assume 40% of the $89 billion was transfered to the states, of which most supports spending on goods and services. Note that the GDP deflator is about 10% higher now than in 2005. Calculate real government spending on goods and services by end-2009Q2: (89 × 0.40)/1.10 = 32.4 Ch.2005$.. Divide this stimulus by 2009Q2 GDP, not at annual rates. 2009Q2 GDP is about 3223 billion Ch.2005$…32.4/3223 = 0.01…The resulting percentage increment to GDP assuming the multiplier for spending on goods and services is 1.0 is 0.01…Annualize the implied increment to 2009Q2 GDP: (1.01)⁴ = 1.04. In other words, the $89 billion results in 4 percentage points increase in growth, assuming zero spending out of tax cuts. Assume 0.5 multiplier for spending on goods and services (kinda wierdly low, but plausible when discussing impact multipliers), and one still gets 2 percentage points increase in growth.

• Sour sixteen
• Don’t Let the Stimulus Lose Its Spark
• Stimulus Remains Unpopular Even as It Boosts Growth
• Learning From '37's Stalled Comeback

U.S. Economy Gets Lift From Stimulus Government efforts to funnel hundreds of billions of dollars into the U.S. economy appear to be helping the U.S. climb out of the worst recession in decades. But there's little agreement about which programs are having the biggest impact. Some economists argue that efforts such as the Federal Reserve's aggressive buying of Treasury debt and mortgage-backed securities, as well as government efforts to shore up banks, are providing a bigger boost than the administration's $787 billion stimulus package. The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. "There's a method to the madness. We're getting out of this," said Brian Bethune, chief U.S. financial economist at IHS Global Insight. Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects. Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action. Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus. For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. "Without that extra stimulus, we would be somewhere around zero," said Jan Hatzius, chief U.S. economist for Goldman.

• Who should get credit for a recovery?

International Situation

Goal of Unified Europe Falters Amid Downturn The drive toward European unity required big doses of both political and financial capital, with Western European banks showering cash on Eastern European entrepreneurs like Mr. Seres, who used the money to build hundreds of thousands of square feet of office space for a booming Budapest, Hungary’s capital. Mr. Seres is just one of Mr. Stepic’s 15 million customers at the huge bank Raiffeisen International, served by some 3,200 branches across Eastern Europe. This eastward Manifest Destiny seemed for years an inexorable and predictable process, with membership in the European Union followed by entry into the euro currency zone. But as money from the West fueled a debt-laden binge in the East, that grand vision may have blinded investors to the risks of cross-border, cross-currency lending.

• German Government Spending Was Stimulus to Lift Economy Out of Recession
• Official Says Russia Is Emerging From Recession
• Gordon Brown's $1.1 Trillion G20 Consensus Unraveling

Risks Mount in China as Stimulus Pace Wanes Ten months after China unleashed a massive economic-stimulus program, worries are building about what happens to the world's third-biggest economy when the government money runs out. China's stock markets have plunged this month on concerns Beijing might tighten the reins on lending and abruptly end the party. Even if the speculation is overblown, the economy still looks unready to motor on after the four trillion yuan ($585 billion) in stimulus starts to fade later this year.The authorities haven't weaned the economy from its dependence on exports, so with demand for Chinese goods in key markets like the U.S. likely to remain weak, the letup in public spending and loans later this year could leave China in a bind. While the country might shift benignly to stable levels of economic growth, it faces the risk of a renewed slowdown -- or worse -- next year, asset bubbles, overcapacity in basic industries or a burst of inflation from all the money the authorities have injected into the economy. "China is not changing its growth model," says prominent China-watcher Andy Xie. "It is pumping up demand in ad hoc ways." Instead of steering the economy toward growth based on domestic demand, Beijing is using stimulus as a stopgap until exports rev up again, says the Shanghai-based economist. But if developed economies don't rebound as expected, "we will have a second dip by around the middle of next year and we will be talking about a second stimulus" in China, Mr. Xie said. Worries like this partly explain why Chinese shares sank 15% from Aug. 4 through Friday after jumping about 90% since the start of the year. The Shanghai Composite Index closed 1.7% higher Friday at 2960.77. China is likely to hit the government's official growth target of 8% if for no other reason than the authorities have the power to make that happen, at least for a time. Money supply is growing at its fastest in 13 years and fixed-asset investment is running at growth levels not seen since the height of the last inflationary cycle in 2004.

• The Chinese Are Bracing for Bad Loans
• Wen Cautions Chinese to Avoid 'Blind' Optimism
• Coming Home: Appliance Maker Drops China to Produce in Texas
• Sinopec Looks Overseas to Bolster Production

It's High Time to Ruffle a Few Billion Feathers For Asia’s billions, inertia is not an option as the fallout from the global crisis spreads. The hope is that China’s 7.9 percent growth will remove the need to retool economies. Or that President Barack Obama’s stimulus efforts will soon put U.S. consumers back in shopping-binge mode. Don’t bet on it. Asia isn’t doing remotely enough to achieve better economic balance. China is a case in point, and an important one; it may just prove to be a microcosm of what Asia will experience in the years ahead. Here, Chinese Premier Wen Jiabao’s “four uns” are worth considering. Two years ago, Wen pointed out that Asia’s second- biggest economy was increasingly “unbalanced, unstable, uncoordinated and unsustainable.” The crisis oozing around the globe was a mere glimmer in the eyes of Asian officials in March 2007 when Wen made that comment. And yet here we are: The U.S., Japan and Europe are limping along. The developing world didn’t really plan for such a scenario. Its powerful snapback from the 1997 Asian crisis was largely thanks to a U.S. consumer flush from rapid growth and roaring asset values. Asia exported its way to returning growth and never looked back. No such locomotive exists today. Hence the roughly $2.2 trillion of stimulus governments have poured into the global financial system. It will only go so far, though. The canard that Asia had decoupled from the U.S. is dying a hard death as governments brace for an extended period of U.S. thrift. By Roach’s calculations, Americans account for about 4.5 percent of the world’s population and its consumers spent about $10 trillion in 2008. China and India, which account for roughly 40 percent of the world’s population, consumed about $2.5 trillion. Good luck living without the U.S. The risk is that U.S. households are embarking on a multiyear retrenchment. If so, Asia’s unbalanced, export- dependent economies are in for a more difficult few years than many believe. Rebalancing Asia’s economies would be a daunting task amid strong global growth. It’s even more difficult in this recessionary environment. One challenge is culture. Asians are savers and good luck getting them to consume more when they fear they may be jobless in a year. Another challenge is softening the blow such a transition might deal to growth in the short run. Much of Asia lacks political will.

Shipping Rates Seen Falling 50% as China Cuts Imports Amid Vessel Overrun Just as global trade starts to recover, the shipping market is crashing for the second time in a year as China reduces raw-material imports and record numbers of new vessels set sail. The rate for leasing capesize ships, boats three times the size of the Statue of Liberty, will drop about 50 percent from the current price of $37,865 a day to as low as $18,000 before the end of the year, according to the median in a Bloomberg survey of six analysts and fund managers. Forward freight agreements traded by brokers show the fourth-quarter average price will be 7 percent lower. Shipping rates, which already fell 59 percent from this year’s high, are retreating as the Organization for Economic Cooperation and Development predicts a 16 percent drop in world trade for all of 2009. China’s State Council called for curbs on steel and cement production last week. A record 146 capesizes will be added this year, equal to 28 percent of the fleet, according to Fearnley Consultants A/S. “The pressure of the new ships will be overwhelming,” said Andreas Vergottis, the Hong Kong-based research director at Tufton Oceanic Ltd., which manages the world’s largest shipping hedge fund, with $1 billion of assets. “It will take a lot of time and a lot of pain before shipping recovers.” The biggest-ever order book for new carriers, according to Lloyd’s Register-Fairplay, may hurt profits at shipping lines while providing higher returns for traders. Rates for capesizes have fluctuated more than 50 percent in seven of the past eight years.

How Science Can Create Millions of New Jobs Name an industry that can produce 1 million new, high-paying jobs over the next three years. You can't, because there isn't one. And that's the problem. America needs good jobs, soon. We need 6.7 million just to replace losses from the current recession, then an additional 10 million to keep up with population growth and to spark demand over the next decade. In the 1990s the U.S. economy created a net 22 million jobs, or 2.2 million a year. But from 2000 to the end of 2007, the rate plunged to 900,000 a year. The pipeline is dry because the U.S. business model is broken. Our growth engine has run out of a key fuel—basic research. But since the 1990s, funding for basic research has slowly declined. Bell Labs had 30,000 employees as recently as 2001; today (under current owner Alcatel-Lucent (ALU)) it has 1,000. That's symbolic and symptomatic of the broken link in the U.S. business model. With upstream invention and discovery drying up, innovations capable of generating an industry have thinned to a trickle. It's tempting to ascribe current job losses in the U.S. to the deep recession or to outsourcing, but the root of the problem is the absence of high-value job creation. We have been through three recessions since 1981, not including the current economic meltdown. Throughout those years, U.S. companies have engaged in aggressive outsourcing, yet the economy bounced back from each downturn with a new blockbuster industry or two. Eventually we will emerge from the current recession, but don't expect to see the same kind of job-creating vigor this time around. In the past, when the U.S. exported high-paying jobs to low-wage countries, we replaced them with even greater numbers of high-paying jobs in industries whose inception could be traced back to science done decades earlier. The PC, Internet, and cellular industries, born in the 1980s and 1990s, more than offset the loss of high-paying jobs in consumer electronics, steel, and other sectors. But in recent years, outsourced software and manufacturing jobs have largely been replaced by millions of low-wage service jobs in fast-food, retail, and the like. Compounding the effects of outsourcing and extended recession, the ongoing destruction of old business models (think print journalism, the music business, and landline telephones) will slash a large number of high-value jobs in the coming decade. The result? A broken demand structure.

• Where Have You Gone, Bell Labs?
• Restoring American Competitiveness