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• Q:How do econa Tists de(me to ul rate goes up and job opportunities disap- )lecessIfX/! pear. Income gains.including wage gains,are ECONOMIC A:There is no written definition of recce- leaner. By and large,there are tougher times. OUTLOOK lion.The general rule of thumb is two In the past,blue-collar workers have been hurl consecutive quarters of economic decline. a lot more than white-collar workers because of When's The National Bureau ri Economic Re- the Hot buying in sales of big-ticket big-ticket items.if people search in New ti'urk[a private thinklankj are nut buying the big-ticket items,businesses is the unofficial judge of when recession lay off the workers who produce them. begins and ends.They look at a variety of For people on fixed incomes,like retirees,it's the factors,including employment.but there had because income goes down.Historically. is no set rule. many of retirees go through"rate shock:'They huv CDs in the mid-'80k and the rate could be Next r-When do you expect the next as high as IS percent:in the rcent.c of a reces- recessial? siun it could he as low as?percent. A:There is a good possibility of a rcces- There are some benefits too.Interest rates go expansion ion developing in 1997 or 1998.Why'! dow n.so if you're borrowing to buy a home secession� ne reason is simply age.The economic and you still have a juh,you're in hewer shapes is getting old,so you have to The inflation rate is lower,so everything you play probabilities. buy,from groceries to metals,is going to go up Norwest Corporatlon's chief -There is really no rule other than an at a slower rate. economic expansion dies of old age.But The share of personal income saved tends to economist defines,explains, historically,since World War 11,a reccs- actually increase during a recession.The pie is and predicts a recession. siun has occurred every four or five years. shrinking,but the share of the pie saved is in- But it's more than that.This economic creasing. In total dollars and cents,personal expansion began in 1991.Since then,we saving declines,but people with jobs tend w By Kate Peterson have exhausted all the pent-up demand save a bigger portion of what they earn because for houses.cars,and furniture.In general, they are afraid of losing their jobs. economic growth is supported by sales of In the middle of a recession is usually a good these big-ticket items.In economic reccs- time to buy stocks,but people are afraid stock sions,that's the area that suffers. prices will drop,so they look for something A.'.6, Why does it suffer'?These items are in- safer,like CDs. ..: terest sensitive.And interest rates,incluJ- •CC ing mortgage rates.have risen and could IYIfIY�8o�fared n ? march upwards because of inflation. reCe8Ei0I18 best news about inflation is behind A:Stinncsota has fared very well,with the ex- The us.One reason is that labor costs,espe- ccphon of the Twin Lilies.The Twin Cities ac- cially benefits,are likely to go up,not counts for 55 percent of the jobs in the state. down.As they increase.the Fed will hike And the Twin Cities tends to follow more interest rates to hold down inflation.That closely the national economic trends.Greater will hurt interest-sensitive areas of the Minnesota tends to follow its own pattern. economy. Greater Minnesota represents a shock ab- `•' The global economic condition is anoth- sorter for the Twin Cities economy.We have �- er reason[that we could(ace recession in some ups and downs,but nothing like the na- ,$�'•� 1997-981.Our economy is much more tional ups and downs.We've had more stability globally dependent now than it has ever in recent%cars. i been.Japan is coming out of a five-year recession/depression.While it is growing. Q:HOW does an economy puff { the level of economic activity is very slug- Itself act of a recession? gish.European economies also are just A:Another reason you go into recession is that, trying to come out of economic recession. as sales go down,businesses keep inventories While they are growing,don't expect anv down.so production drops.One economic the- major growth there.The point is,our ex- ory says you reach a point where production is Dr.Sung Won son.,chief.....mi.t i., ports to them will not be strong. so low and inventory stocks are so low,simply Norwest C—pored—'The Twin Citie.tends to maintain existing sales,you have to start pro- to ioHow mo clo.etr the national economic Q:What are Me practical ducing again. t.end..Q—t.,Mi...eota tend.to toil.w lee elfects of recession? When you start producing again,that gener- own p.tt. .' A:Clearly,first of all,jobs.The unemploy- ates more jobs and more sales. ■ 40 OCTOBER 1996 TWIN CITIES BUSINESS MONTHLY •