Why It Doesn’t Feel Like A Recovery

The government and the media are sending confusing signals. “The recession ended in August, 2009.” “Evidence indicates a possible double-dip recession.” “Every economist who has looked at it says that the Recovery Act (i.e., the stimulus bill) has done its job.” (Barack Obama) “The economy still has a long way to go.” (Ben Bernanke) “Jobless numbers are worse than you think.” “Recession deeper than originally thought.”

Questions abound, such as.

·        Is the recession really over?

·        If so, when will we see tangible evidence of recovery?

·        Have we hit the bottom of the cycle yet?

·        If not, where is the bottom?

·        If we have hit bottom, how long will we be there?

These questions and others of a similar nature are based on one simple truth – it doesn’t “feel” like we’re in a recovery mode nationally. In most parts of this country, and in much of the remainder of the globe, individual intuition tells us that the economy remains deeply troubled. 

Intuition is based on past experiences and current observations. Even members of Generation Y, also known as Millennials or twenty-somethings, are old enough to have experienced the strong economy that existed prior to the 2007-2008 meltdown. Members of all generations – X, Y, and Baby Boom, with even modest powers of observation, sense that things aren’t right in the economy.

Some of the major things we are observing that trouble us are:

·      No jobs – unemployment, whether you settle for the Bureau of Labor Statistics’ highly restrictive definition that sets the figure at 9.5% or the more inclusive calculation that puts it at 17-18%, is not improving

o   The private sector added only 42,000 jobs in July while population growth alone requires more than 100,000 new jobs per month

o   State and local governments continue to be pinched financially and may cut more than half a million jobs, while the federal government continues to cut jobs for the temporary census workers

·      Massive increases in government spending - that can be covered only by raising taxes on the country’s vast middle class, borrowing beyond the point of national bankruptcy, and manipulative increases in the money supply that always devalue the dollar’s purchasing power 

·        Unprecedented government intervention in the private sector – the generator of employment opportunities

The bottom line is simple. The household sector, whose spending accounts for 70% of gross domestic product, currently sees little or no reason to feel confident about the future, at least near-term. The change in the household savings rate from a negative figure in the first half of the decade to a positive 6.4% today clearly evidences that apprehension. And, as economist Paul Godek recently observed in the Wall Street Journal, private investment and hiring likewise are suppressed by economic and political uncertainty.

As has been noted often, the answer to this economic malaise is strong job and wage growth. For that to happen, confidence in the nation’s economic future has to be restored. That’s not likely to happen under the political agenda of Congress and the current administration.