Monday, April 21, 2008.
By CHRISTINE CHMURA
TIMES-DISPATCH COLUMNIST

We've now logged four months of contraction in key economic indicators. Along with continued signs that the credit crunch is affecting the overall economy, it's highly likely that the nation is in recession.

Recessions are tough on people who lose their jobs and businesses that have to deal with reduced revenue and profit. But can anything good come out of a recession?

Yes, recessions often make businesses more efficient. During times of strong growth, some businesses don't notice the fat they are taking on. Or they may not realize that new technologies have increased their efficiency to a point that reduces labor needs.

The proliferation of computers in the 1980s, for example, gradually encouraged employees in offices to create letters and reports directly in electronic form rather than dictating or writing in long hand to be transcribed. The efficiencies gained from this shift in administrative work from secretaries to higher-level office workers was largely realized during the 1990 recession. Firms were looking for ways to cut costs and found that fewer administration assistants were needed.

This recession already is bringing efficiencies to businesses associated with residential real estate, which has been hardest hit by the slowdown.

John McGurn, Realtor with Re/Max Commonwealth, said slower sales and higher gas prices "have encouraged me to organize my days better to minimize trips. When the housing market was booming, I did not worry about taking multiple trips to the same location."

He also has a service that he sets up for clients that sends them an e-mail with details, including pictures, of any new listings that fit their needs in terms of price, location and other factors. Driven, in part, by higher gas prices, this expanded use of the Internet provides more efficient use of time for McGurn and his clients.

And undoubtedly, financial institutions are becoming more efficient around mortgage lending to more accurately assess the credit risk of potential homeowners, as well as assessing the risk of complex financial instruments they put on their balance sheets.

Without heavy rain storms, a leaky basement or roof may go unnoticed for years, and the related damage can be significant to repair. So, too, recessions often highlight a business's point of weakness in need of attention. In the long run, we are better off with the correction.

The world lost a wonderful economist and a fantastic person late last month. Dan M. Bechter, Ph.D., died March 26 at age 69.

When I was a young economist at the Federal Reserve Bank of Richmond, Dan served as a mentor to me and others who continuously wanted to learn.

When presented with an opportunity, he would teach us how to apply economics by thinking out loud about how an event might work through the economy. He was also an excellent writer and was generous and patient in taking time to help us develop our writing style.

I am probably only one of many who would say that my career would not have been as successful without Dan's influence. He clearly made the world a better place through the people his life touched.

Even in his retirement, Dan continued to help me improve. As you are reading this article, I am missing his Monday morning e-mail critiquing this column. More so, I'll miss his examples of enjoying his retirement years and hearing about the many successes of his family members. 

Christine Chmura is president and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or receive e-mail at www.chmuraecon.com.