The Economy in 1981

By Randall J. Pozdena Economist Federal Reserve Bank of San Francisco

THE recession

I of 1980 produced one of the largest quarterly declines in output ever recorded by our economy. Mercifully, however, these severe effects were shortlived.

The recession struck in the first half of 1980 (as we forecast in last year's December Business Forecast Issue) and by the last quarter, most current and leading indicator3 were signaling improvement.

Does this indicate that, once more, our economy has shown its incredible resilience and we are back on an acceptable long-term growth track?

I do not believe that it does. On the contrary, the behavior of the economy in 1980 has ominous implications

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Story at a Glance

The behavior of the economy in '80 has ominous amplications for 1981 and beyond . . high interest rates and inflation are likely to prevail new type mortgages necessary to help housing.