Economy 2001: Glass Half-full or Half-empty?

Economic analysts’ first forecasts for the new year are generally bearish, with Morgan Stanley Dean Witter’s influential chief economist even releasing a report entitled “Recession Arrives.” Other analysts, among them the chief economist of a Midwestern investment bank, go so far as to say the recession, which is generally defined as two consecutive quarters of declining growth, actually began last October, according to a recent report in The Wall Street Journal. One reason often cited by the naysayers: the lackluster retail holiday season.

But not everyone is predicting a recession for the first half of the new year. Jack Guynn, president of the Federal Reserve Bank ofAtlanta, warned against self-fulfilling pessimism in a speech that cited such positive economic signs as low inflation and low unemployment, according to the report.

But most of the pessimistic analysts do predict tougher economic times for the first half of 2001, and many of them also point to the energy crisis centered in California as one reason that the bright economic prospects of the last decade have suddenly grown dimmer.

In California, sharply higher energy prices will have a negative short-term impact on the bottom lines of textile firms, among other local manufacturers that are big energy consumers, according to a senior analyst at the Santa Monica, Calif.-based Milken Institute.

Employment in the national apparel and textile businesses continued to contract in the year 2000. U.S. apparel lost 48,000 jobs last year, while domestic textile mills dropped 25,000 workers, according to U.S. Labor Department statistics. At the end of the year, the U.S. apparel workforce stood at 621,000 and U.S. textile’s workforce totaled 524,000, according to the Labor Department.

However, there were bright spots in the year just ended for retail in general and for apparel in particular. Talbots Inc. and Kohl’s Corp., for example, defied the holiday downturn and posted sparkling December sales figures. Consumer traffic for the generally glum holiday season was up 0.5 percent in malls, but down 1.6 percent in department stores, compared to holiday 1999, according to the National Retail Federation’s National Retail Traffic Index. The typical household spent $828 for holiday gifts, according to an International Mass Retail Association (IMRA) survey; those in the Northeast spent the most ($956) and those in the West, the least ($617), while the youngest shoppers (ages 18 to 24) spent the most ($1,082) and the oldest (65 or over) spent the least ($503), according to IMRA.