Supply And Demand

4 Pages 1084 Words

Job Applications of Supply and Demand

To understand why the U.S. economy can't seem to master a stronger recovery, it helps to look for clues in Victorville, Calif., where 500 unused and unwanted passenger jets, some of them are brand new, sit wingtip to wingtip in the desert. Or in Detroit, where the Big Three continue to churn out large numbers of passenger cars that they sell at little or no profit, just to keep their factories busy. Or in nearly every major metropolitan area, where office vacancy rates are still rising after 18 months, and have reached 25 percent in Dallas, 24 percent in Raleigh-Durham, N.C., and 18 percent in San Francisco. The best explanation can be found in those falling prices shoppers find for clothing, televisions, hotel rooms and cellular phone service. While the bargains are great for American consumers, they are being paid in the form of continued corporate layoffs, lackluster stock prices and a sky-high trade deficit, which has an economy that's having trouble building up a head of steam.
“Economists refer to this phenomenon as overcapacity, which is really nothing more than too much supply chasing too little demand. And it can be found these days across a wide swath: agriculture, autos, advertising, chemicals, computer hardware and software, consulting, financial services, forest products, furniture, mining, retail, steel, textiles, telecommunications, trucking, and electric generation, just to mention a few. In most every case, it is accompanied by prices that are flat or falling.”
To be sure, overcapacity is a feature of every recession. A slowdown in consumer spending and a decline in business investment suddenly leave too many companies with too many workers, underutilized plants and underperforming stores. In most cases, it is only after most of that excess is cut back, and supply and demand get back into some rough balance, that businesses begin hiring and investing again, laying the foun...