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Purely anecdotal—but impressive nonetheless

Recessions are painful, but they also are harbingers of better things to come. A recession happens when an economy is suddenly forced to change the way it operates—for example, to shift resources from overbuilt or overextended sectors to sectors that had been neglected. Recessions force changes in relative prices, so that unproductive resources can become productive again, and they force people to figure out new and more creative ways to do things to do in order to survive. Hardship is painful, but it can be beneficial.

Here's what the co-owner of a large design/construction firm in the Pomona Valley specializing in home remodeling told me the other day (he's also the one who told me a month ago that he had just re-hired two architects that he laid off last year), in response to my sending him the above chart which suggests that the third quarter uptick in residential construction activity has probably ended the deepest recession ever to hit the industry:

No wonder I've felt a bit nauseous and dizzy the last 18 months. But as we discussed, I've been asking around and everyone I talk to says that they have had a huge uptick in work flowing in - from my roofer today to other remodeling companies all over the country. My friend in Columbus MO said he had the best sales month ever this last month. I'm sure hoping this is a solid leading indicator!

Friday night my wife and I went to a late dinner at a nice local restaurant. I was surprised to see that the menu now has a special "Light Meals" option available from 5 pm to 6 pm, and from 9 pm to 10:30 pm. For $20 you get a choice of appetizer and a choice from 10 main courses, served in smaller-than-normal portion sizes. At 9:30 pm the restaurant was almost full, something we haven't seen for a long time, and the waiter was simply delighted. This solves several problems for us: not wanting to eat large portions at night, not wanting to share main courses, not wanting to spend extravagantly for a last-minute decision to go out for a bite to eat, and not wanting to go to a restaurant after 9 pm because they are emptying out. It also brings more business to the restaurant, allowing it to remain busy for more hours every day.

I imagine there are all sorts of anecdotes such as these happening around the country, in many lines of business. All this activity—change, if you will—is going on behind the scenes, and it is making the economy more productive. And it is all happening without any help from government stimulus programs. Indeed, I continue to believe that the economic recovery will proceed in spite of government stimulus programs.

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