Handicapping A Soft LandingGene Koretz
Signs are multiplying that the economy has slowed from its heady 4.1% advance in 1994. But before one concludes that 1995 will see a soft landing, economist Samuel D. Kahan of Fuji Securities Inc. in Chicago advises a look at the historical record.
In the past 40 years, notes Kahan, the U.S. has experienced just 14 years of growth exceeding 4%. In half of those 14 years, growth in the following year also topped 4%, and in 10 it exceeded 2.5%. Thus, the historical record suggests there's just a 30% chance that growth will slow to 2.5% this year and an even bet that it won't slow much at all. "Once the economy develops a head of steam," warns Kahan, "it can take a year or so for things to cool off."