Why is the economic recovery so weak?

Source: Sentier Research

Why is the current economic recovery so much weaker than in the previous two recoveries?

I don’t claim a profound knowledge of economics, but here’s what I think.

During the time of peak prosperity, the American economy was based on a benign cycle—high wages supported a mass consumer market, which supported high employment.

Since the 1980s, American wages have been stagnant or falling, and Americans maintained their purchasing power by means of borrowing.  But since the 2008 recession, they have reached the limits of their power to borrow and spend.

Big financial institutions and holders of financial assets are investing more in debt instruments or in production overseas than in job-creating enterprises in the United States.  At the same time government at all levels has responded to hard times by cutting spending and employment.

Both the public and private sector are dis-investing in education and training, in scientific research and in the infrastructure necessary to a productive economy.

Barring a change of direction, I expect things to continue to worsen.

How can we the people turn things around?  Being honest about the situation would be the first step.  Government could stop doing harmful things, such as the no-strings bank bailout and pro-corporate trade agreements.  Corrente’s 12-Point Platform is the kind of thing we should be thinking about.

The official unemployment rate is the percentage of Americans in the work force who are looking for work and can’t find it. The U-5 unemployment rate also includes people who want to work, but have given up looking for work. The U-6 unemployment rate also includes people who work part-time who want to work full-time. The chart above shows the weakness of the current economic recovery.

The charts above and below are based on FRED data from the Federal Reserve Bank of St. Louis.

The chart above shows that the number of full-time jobs has not kept up with the growth of the American population.

Source: Advisor Perspectives.

The chart above shows that the income of middle-class Americans, adjusted for inflation, is still below where it was before the onset of the recession.

LINKS

5 Charts That Show How the Middle Class Is Disappearing by Katie Rose Quandt for Moyers & Company.

Median income continues to climb, but it’s still below where it was when the Great Recession began by Meteor Blades for Daily Kos.

Tags: American economy, Economic Cycle, Economic recovery, Unemployment rate