The_Churn - The Churn - 1992 Annual Report - FRB Dallas...

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Back to Entire Page View You are here: FRB Dallas Home > About the Fed > Annual Report > 1992 January 24, 2005 1992 Annual Report—Federal Reserve Bank of Dallas The Churn The Paradox of Progress A Letter from the President The year 1992 was one of the busiest and most productive in the history of the Federal Reserve Bank of Dallas. For the first time in 71 years, the Dallas Fed moved into a new headquarters building—a milestone event culminating almost a decade of careful planning and hard work. We are very pleased with our new home and look forward to serving our constituencies more efficiently and effectively than ever. The health of the Eleventh District economy and banking system continued to improve in 1992. As in the previous two years, our District economy fared somewhat better than the nation as a whole, possibly because the District was still on the rebound from the sharp contraction of the late 1980s. In terms of employment, we managed to avoid the recession but not the sluggish recovery. Our employment growth slowed below trend, but our unemployment rates increased to national levels, especially in areas vulnerable to defense cuts. The financial condition of our banks has improved in the past two years, with bank lending stabilizing in 1992 for the first time since 1985. The credit crunch, however, is still very much a reality in the Southwest. While it eased somewhat in 1992, the credit crunch continues to impede job growth in small- and medium-size businesses that rely on banks for credit. Despite these tight credit conditions—an issue of concern during monetary policy deliberations—small-to medium-size businesses have continued to lead the economy in the creation of new jobs in the 1990s. This phenomenon of job creation during a period of slow employment growth has led us to explore some of the issues highlighted in our Annual Report essay, "The Churn: The Paradox of Progress." For some time now, I have been struck by how the usual statistics on labor markets can be misleading. Month after month, small changes in total employment and unemployment give the impression that not much is happening when, in fact, those small net changes mask huge gross changes that are revolutionizing our economy. A small net increase of 100,000 in total employment may mean job losses that month of several hundred thousand and an even greater number of new jobs. We should not let the small net gains obscure the underlying dynamics of a growing, constantly changing economy. One of my college professors, David McCord Wright, used to say "Growth comes through change and causes change" so often that I quickly learned to tune him out. Only recently have I come to appreciate the wisdom of his mantra. Joseph Schumpeter also captured the essence of this message long ago in his classic description of "creative destruction." It is natural during recession and sluggish recovery to worry about job losses. We read almost daily of layoffs and downsizings at familiar Fortune 500 companies. We rarely read of sizable numbers of new jobs being created. Yet, in recent months,
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The_Churn - The Churn - 1992 Annual Report - FRB Dallas...

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