It seems to me…
“Economic growth without social progress lets the great majority of people remain in poverty, while a privileged few reap the benefits of rising abundance.” ~ John F. Kennedy.
Despite all the political rhetoric to the contrary, the U.S. economy has fully recovered from the past recession. Yes, we still have unacceptably high unemployment but that primarily is the result of technological improvement and increased globalization. And there still is a mostly housing-related $3.7 trillion debt overhang and a need for about 5.3 million additional jobs to reach full employment.
But look at the bright side: The stock market is up. Weekly out-of-work claims are at a four-year low. Factory managers’ purchasing orders hit a six-month high in January. Consumer confidence figures are up. Housing permits are at a three-year high. Retail sales were up 1.1 percent in February[i]. Basically, our economy has returned to normal.
U.S. growth, while higher than any other wealthy nation, corresponds to one of the slowest recoveries on record and the GDP probably will only increase about 2.5 percent this year as opposed to the 3.4 percent average yearly growth since World War II. At this rate, it will take about another three years for employment to recover to pre-recession levels.
The stock market is up 9.5 percent just this year but home prices are about 34 percent below pre-recession levels and still declining (though more slowly than over the past several years). Mortgage and home-equity debt decreased by $146 billion in the fourth quarter. Corporate profitability has resulted in $2 trillion in cash reserves primarily through increased worker productivity and growth in foreign markets.
One factor slowing growth is that consumers reduced spending and increased saving; more than 100 million credit cards were cancelled; and they still are paying down personal debt. But the U.S. has reduced its overall public and private debt levels more rapidly than any other country since the start of the recession. And while beneficial to the overall economy, consumers are starting to increase personal spending though they still are burdened by credit limits and flat income levels.
Much of the recovery can be attributed to economic policies enacted at the beginning of the recession. TARP and the stimulus bailout were totally successful in preventing our country from falling back into a 1929 economic meltdown. Keynes (who conservatives attempt to discredit even though he repeatedly has been shown to have been correct) would make the point that what we still need is additional stimulus. The best example of what should not be done is a reduction in public-sector spending as happened in 1938 when acceding to conservative pressure resulted in a double-dip. They did it then, apparently have not learned – and now want to do it again. Those who have not learned the lessons of history…
Demographics and national culture also have contributed to recovery. U.S. workers on average are younger than workers in most other developed countries and both employers and employees tend to be more innovative and flexible than elsewhere enabling them to more rapidly take advantage of new opportunities. A weak currency, technological superiority, and flat wage growth has increased our global competitiveness though the current administration is being subjected to politically-motivate criticism for implementing policies necessary for economic recovery. These same economic factors also could result in increased investment in U.S. technology though this growth is constrained by low graduate levels in STEM subject areas.
Employment opportunities are increasing but they tend to fall mostly at the high and low range of the wage scale with too few available middle class jobs. While there is considerable complaint about high fuel costs, manufacturing expansion can be partly attributed to insourcing resulting from high transportation costs.
I previously pointed out that even though the recovery is fairly weak, it is relatively broad-based and durable[ii]. The remaining problem is how to increase its pace. Regardless of what we might hear during this politically-charged election season, our remaining options are improving educational opportunities, tax code simplification, providing adequate welfare and healthcare, and bringing our infrastructure up to adequate levels. All of this requires time, investment and most difficult of all, patience and confidence.
That’s what I think, what about you?
[i] Foroohar, Rana, and Bill Saporito. The 97-lb Recovery, Time, 2 April 2012, pp22-29.
[ii] Job Creation, https://lewbornmann.wordpress.com/2012/03/08/job-creation/, 8 March 2012.