Companies were busy building more capacity than needed and producing more goods than could be sold. Now, factories are cutting employment and output, waiting for the excess inventories to sell. The economy has been riding the high-tech wave for a long time. Still, the biggest factor driving the U.S. economy is consumer spending. It accounts for two-thirds of all goods and services produced in the nation.
Unemployment is still low and the economy continues to create jobs.
This drives incomes higher and supports more spending. While still historically low, this is the highest unemployment rate in 20 months. Recently, a large drop in earnings estimates has occurred in manufacturing, auto parts, computer chips and telecommunications. So, in spite of consumer optimism, large companies are starting to cutback. Stocks - The stock markets are officially in bear territory and continue to plunge.