Tag Archives: recovery

Why Has the US Economy Picked Up? Congressional Republicans

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(Jan. 22, 2015) What a difference two months make. As recently as November, when Republicans scored strong gains in the US congressional elections, the universally accepted explanation was economic performance that was perceived as disappointingly weak. (As always, “it is the economy, stupid.”) A substantial share of the American public thought that economic conditions were actually deteriorating last year; many held President Barack Obama responsible and voted against the incumbent party.

Now suddenly everybody has discovered that the US economy is doing well after all. So much so that Republican leader Mitch McConnell, newly elevated to Senate Majority Leader, has switched from a position that the economy is bad and Obama is to blame, to a position that the economy is good and the Republicans should get the credit. Continue reading

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The Middle Class Crunch: Bipartisan Program for New Members of Congress

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       On December 3-5, 2014, the Institute of Politics at Harvard University held its biannual Bipartisan Program for Newly Elected Members of Congress.  Most of the congress-people come.   This year I was on a panel on the domestic US economy, titled the “Middle Class Crunch.”    In Part I, presented here, I briefly reviewed recent economic statistics.   Part II, laying out 8 recommended policies, will follow.

       The standard economic statistics indicate that the US economy has been doing well lately, not just relative to the severe 2007-09 recession, but relative also to what most Americans think and relative to how other advanced countries are doing.  This applies to (1) GDP, (2) jobs, (3) the stock market, and (4) the budget.

      (1)  GDP growth has averaged an impressive 4.2% over the last 2 quarters.   It has averaged a more moderate 2.4% over the last 4 quarters, but even that is still above the disappointing 2.1% in 2011-13.  See  Figure 1.

Figure 1. Growth has been gradual since the recession’s end in June 2009, but faster lately

Picture1_billionsofchaintype2009dollar

Source: Macroeconomic Advisers, Nov. 18, 2014; monthly numbers derived from US Bureau of Economic Analysis quarterly series. E

        (2) Employment growth has shown  an unprecedented string of positive numbers. The private sector has added 10.6 million jobs over 56 straight months of job growth, easily the longest streak on record. and has added at least 200,000/mo. for nine consecutive months. See Figure 2.

Figure 2.  Change in private sector employment.

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     (3) The stock market is setting record highs.

(4) The budget deficit has experienced a record improvement since 2009: a decline of more than 2/3.  (See Figure 3.)   It is now  2.8% of GDP, which is below the average deficit since 1980 (3.2%).

Figure 3. The 2014 federal budget deficit is down to 2.8% of GDP.

Picture3_2014federalbudgetdeficit

      If the economy is doing so well, then why don’t Americans see it that way?   The “middle class” doesn’t feel better off because the gains have accrued to people at the top. Median family income  is still 8 per cent below its pre-recession level and even further below its 2000 peak.  It has barely risen above its 1990 level.  See Figure 4.

Figure 4. Real median household income is barely above its 1990 level.

Picture4_whydoamericansfeelworse

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One Recession or Many? Double-Dip Downturns in Europe

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The recent release of a revised set of GDP statistics by Britain’s Office for National Statistics showed that growth had not quite, as previously thought, been negative for two consecutive quarters in the winter of 2011-12.  The point, as it was reported, was that a UK recession (a second dip after the Great Recession of 2008-09) was now erased from the history books — and that the Conservative government would take a bit of satisfaction from this fact.    But it should not.    

Similarly, in April of this year, Britain was reported to have narrowly escaped a second quarter of negative growth, and thereby escaped a triple dip recession.   But it could have saved itself the angst.

The right question is not whether there have been double or triple dips; the question is whether it has been the same one big recession all along.  As the British know all too well, their economy since the low-point of mid-2009 has not yet climbed even halfway out of the hole that it fell into in 2008:  GDP (Gross Domestic Product, which is aggregate national output) is still almost 4% below its previous peak, as the first graph shows.   If the criteria for determining recessions in European countries were similar to those used in the United States, the Great Recession would probably not have been declared over in 2009 in the first place.   

Recent reports that Ireland entered a new recession in early 2013 would also read differently if American criteria were applied.  Irish GDP since 2009 has not yet recovered more than half of the ground it lost between the peak of late-2007 and the bottom two years later.  Following US methods, the end would not yet have been declared to the initial big recession in Ireland.   As it is, a sequence of tentative mini-recoveries have been heralded, only to give way to “double-dips.” 

    Continue reading

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