The Truth About the American Economy (II)
The Stalled Recovery
The U.S. economy was supposed to be in bloom by late spring but it’s hardly growing at all. Expectations for second quarter growth aren’t much better than the measly 1.8 percent annualized rate of the first quarter.
That’s not nearly fast enough to reduce our ferociously-high level of unemployment. The Labor Department will tell us Friday whether the jobs situation improved in May, but there’s been no sign of a surge in hiring. Nor in wages. Average hourly earnings of production and non-supervisory employees – who make up 80 percent of non-government workers – dropped to $8.76 in April. Adjusted for inflation, that’s lower than they were in the depths of the recession.
Meanwhile, housing prices continue to fall. They’re now 33 percent below their 2006 peak. That’s a bigger drop than recorded in the Great Depression. Homes are the largest single asset of the American middle class, so as housing prices drop many Americans feel poorer. All of this is contributing to a general gloominess. Not surprisingly, consumer confidence is also down.
The recovery has stalled. It’s unlikely America will find itself back in recession but the possibility of a double dip can’t be dismissed.
The Problem of Demand
The problem isn’t on the supply side of the ledger. Corporate profits are still healthy. Big companies continue to
