The US economy has a number of advantages over Japan. While Japan counts heavily on exports for its GDP growth, the US middle class consumes a great deal of what is produced in America. Much of the fate of the US GDP is decided within its own borders.
Japan’s GDP is now contracting at an annual rate of 13%. The US economy may be heading in that direction.
Japan may be unique because some much of its production is done abroad in the US, UK, and EU. The American economy is protected from an unusually large dependence on exports as long as people buy cars, travel, eat out, and visit retailers. But, that buffer may be ending.
If unemployment in the US moves rapidly toward 9% or 10%, whatever life is left in consumers will be snuffed out, destroying the economic leverage that the economy has enjoyed so long because of consumer confidence. At that point, exports would become a substantially more important part of the engine that drives American GDP.
US export patterns are already starting to look like those of China and Japan. Demand for technology, airplanes, and defense materials is eroding rapidly as the ability of businesses overseas to buy these items wanes.
Without the consumer, the US recession may deepen more quickly than most economists are willing to admit.
Douglas A. McIntyre
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