Why is the Recovery so Agonizingly Slow?
Via Economist’s View is Mark Thoma’s new column in Financial Times Why is the Recovery so Agonizingly Slow?
Why is the Recovery so Agonizingly Slow?, by Mark Thoma: Friday’semployment report underscored just how slow the recovery from the Great Recession has been. When the recession officially ended in June of 2009 the unemployment rate stood at 9.5 percent, and it peaked at 10 percent a few months later. In the four and a half years that have passed since, the unemployment rate has fallen to 6.7 percent. That is still quite a bit above the full employment level, and the fall in unemployment over that time period has been driven in large part by people leaving the labor force rather than the creation of new jobs. When these discouraged workers are taken into account, the labor market is in poor shape even after more than four years of “recovery”.
Why has the recovery been so slow? …
NO money in my pocket is my reason. Its ALL in the basement of Goldman-Sachs along with YOURS, THE TAXPAYERS, and pretty much the rest of the world’s. The good folks at G-S seem un-inclined to open the vault doors.
I lived in Chile from 2005 to 2010. When I came back, I noticed that the US was more similar to a Latin American country than before. Taxes were similar. The cost of public services was similar. The pay was more similar. The inequality was similar. The government was similar. The culture was more similar. Even the business practices in business were much more similar.
i see more similarity now in marginalized workers. The point is that the recovery is slow because we will only partly recover. We have actually moved downward toward a Latin American type of economy.
2010 was a good time to come back in order to notice the differences.
People are starting to get used to the new normal, and starting to forget what it really used to be like in the US.
People can’t remember what they have been taught to forget or have not been taught at all.
Basically, the U.S. has a demand problem.
In the long-boom, from 1982-2007, Americans increasingly overconsumed (through up to $800 billion a year trade deficits), built-up debt, and median real income either grew slowly or was stagnant, and then declined after 2000.
Low income workers borrowed too much and high income workers saved too much.
The U.S. needed a massive tax cut in 2009, e.g. $5,000 per worker, or $700 billion for the 140 million workers at the time, to jolt the economy into a self-sustaining cycle of consumption-employment, rather than the small and slow tax cuts we got that just put a floor on consumption.
Also, we needed massive deregulation, e.g. getting rid of or reducing half of the $2 trillion a year in federal regulations, rather than piling on more regulations, which the economy hasn’t been able to absorb.