At the office, the story was similar. While real wages kept rising, profits faltered and, for firms facing stiff competition and price-conscious consumers, may not recover soon. "There's this sense on the corporate side that we are a long way from the glory days of the mid-1990s," says Federal Reserve governor Mark Olson. That fear could translate into a slower recovery. In the Pricewaterhouse survey, CEOs expect 2002 revenue to rise an average 15 percent but plan on boosting spending by an average of only 6 percent.

You're fired. Wait, no . . . you're hired! When the 1990s economy was adding jobs at a 3 million-a-year clip, among the biggest winners were part-time and contract workers, largely because firms figured they could get rid of them easily should the economy nose-dive. That's exactly what happened. "Businesses have learned that it's labor that's the key to surviving the downturn," said Joel Naroff of Naroff Economic Advisors. But the notion that labor is expendable has suffered as well. With firms unable to raise prices, they must rely on productivity gains to boost margins. Often those gains come from highly skilled (and usually highly paid) workers, which explains why some firms like EnSafe took lumps on profitability to keep workers on staff. "In essence, we spent our profits to protect our labor force," says Coop. The risk for workers going forward is that businesses that did make big cuts may be slow to rehire. Firms "cut a lot of jobs and still maintained output," said James Paulsen of Wells Capital Management. "That means we can grow without creating jobs."

Wealth effect, schmelth effect. Yes, when the market went up, people spent more. But when stocks went down, consumers didn't pull back. Oh sure, not everything flew off the shelf, but this recession has taught economists that accumulated wealth (or loss of it) does not a cycle make. What kept consumers spending were humdrum items such as lower energy and borrowing costs and higher real incomes. Some economists say the wealth effect, a major source of worry to Fed policymakers a year ago, is practically irrelevant--at least as far as the average American is concerned. Says Paulsen, "We have a consumer that never recessed. All the old rules are out the window." The flip side: While consumers kept on spending, they demanded--and got--bigger discounts. "In a normal recovery, you'd see consumers step up and buy goods, even in the face of rising prices. We're not seeing that now," says Paulsen. That could cut profits, though further productivity gains may offset the squeeze.

Don't fight the feds. At the height of the stock boom, some analysts thought that the Federal Reserve's effectiveness had waned. After all, hadn't all those interest rate hikes in 1999 and 2000 failed to pull the economy down to a safer cruising altitude? In the depths of 2001, as the Fed cut rates massively to spur growth, those critics sang the same refrain: The Fed is impotent. As it turned out, monetary policy seemed to work exactly as intended.

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