James Pethokoukis

Politics and policy from inside Washington

A VW-shaped economic recovery?

August 26, 2009

That is the analysis of my pal Rich Karlgaard over at Forbes. (Insert joke about Obama and fahrvergn├╝gen here.) Some sectors of the economy will boom as others muddle through or stay on the mat. Warren Buffett put it best: “When the tide goes out, you discover who’s been swimming naked.” Here’s a bit from the piece:

But here’s the thing. The American recovery may be U-shaped, on balance, but within that U will pockets of Vs and Ws. That’s why I call it the VW recovery.

The V part of the VW economy includes dynamic growth companies and large exporters. Apple is enjoying a V recovery. Salesforce.com just reported a big, booming V quarter on Friday. Mobile broadband is an entire industry that will enjoy sustained V growth. Low-tax states like Texas, Tennessee and North Dakota are experiencing V recoveries.

America’s W economy includes all those companies, industries, states, cities and personal careers where deteriorating value propositions were masked in good times. It always happens that way. Recessions unmask bad business models. … Today’s W economy: newspapers, McMansion builders, inefficient manufacturers, high-tax state and local governments, and workers unable to adapt, relearn and relocate.

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