In 1901, William Randolph Hearst’s New York Journal launched a cartoon featuring two overly polite friends named Alphonse and Gaston. Each insisted with conspicuous courtesy that the other go first. Amid elaborate bowing, scraping, and apres-vous-ing, Alphonse and Gaston never managed to make it through an open doorway.
Now, 110 years later, economists have a name for the Alphonse and Gaston routine that’s hobbling the U.S. economy: “coordination failure,” Bloomberg Businessweek reports in its June 6 edition. Companies won’t hire because customers won’t spend. Customers won’t spend because companies won’t hire. This stare-down has been going on since approximately December 2007, when the worst slump since the Great Depression took hold. Many Americans would like someone to make a move so they can get back to prosperity. Yet they’ve lost confidence in the actions that were designed to build confidence and restore growth –namely, near-zero overnight interest rates, the bailout of the financial system, a weakening dollar, and stimulus measures that add to the federal budget deficit and the national debt.
The latest downer: Housing prices in 20 big U.S. metropolitan areas fell in March to their lowest level since 2003, according to the S&P/Case-Shiller Index released on May 31. “I wouldn’t be surprised to see prices continue to fall this year and maybe into next year,” says Paul Dales, a senior U.S. economist at Capital Economics in Toronto. The Conference Board announced on May 31 that its measure of consumer confidence fell to 60.8 in May from 66 in April. (It was more than 100 before the recession.) Manufacturing growth is slowing, too, according to the latest data released on June 1. The factory index of the Institute for Supply Management fell in May by the most points since 1984.