A significant factor behind recessions are shifts in demand for major, long-lasting purchases, such as automobiles, furniture and household appliances. In the last recession, sales of those durable goods fell 13 percent, and consumption of nondurable goods — food and clothing, for example — fell less than 4 percent.
In the corporate sector, meanwhile, executives say they’re deeply worried by the turmoil in the financial markets. But businesses have adjusted in the past few years in ways that make them less likely to undertake the kind of mass layoffs that were widespread in 2008 and 2009.
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“Since the onset of the recession, companies have been focused on improving their balance sheets, deleveraging, and increasing productivity,” said Tom McGee, managing partner of Deloitte Growth Enterprise Services, which surveys chief executives of mid-size companies nationwide to gauge the outlook. “We’re not seeing signs that there are mass workforce reductions on the way.”
Moreover, the corporate sector’s financial situation is by many measures stronger than it was before the last recession, meaning companies are less likely to be forced to cut workers to stave off bankruptcy. Non-financial U.S. businesses have $15 trillion in cash or investments that could easily be converted to cash on their books, up from $13.7 trillion in 2007.
“The economy is not primed for a recession in the sense that before you fall into recession, there’s usually a lot of excess, which means if you have a shock, businesses respond quickly by slashing inventories and cutting workforce and investment,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch. “But they’re running so lean right now that there’s not that scope to cut.”
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