Economy grows, but not enough for jobs
By John Browne
Published: Saturday, Aug. 18, 2012, 8:49 p.m.
Economists, investors and even the Federal Reserve are concerned about poor economic growth.
Fearing a recession, savers are hoarding cash. They see the Fed flooding the world with trillions of synthetic dollars, and many are buying gold as insurance against monetary chaos while hedging against inflation. This has driven precious metals prices higher when, in the face of a possible new recession, they should have fallen dramatically.
Great uncertainty exists. But are things really that bad? What do the underlying indicators tell us?
The economy is recovering slowly at a rate of about 1.5 percent, as measured by the nation's gross domestic product, or GDP. And the economic growth is almost 2 percent above pre-Great Recession levels in 2008. Since then, almost 4 million jobs have been created. Industrial production has recovered almost to pre-recession levels. While this is all good news and may delay further action by the Fed to stimulate the economy, it is not the whole news.
While growing, the economy is doing so at a subdued and decreasing rate. In the past six months, the rate of growth fell by almost 40 percent.
In addition, job creation has fallen dramatically. Jobs are crucial to long-term consumer demand, which generates about 70 percent of economic activity. Despite creating the almost 4 million jobs added, there are still 5 million fewer jobs filled than before the recession.
About 46 million Americans are on food stamps and 150 million, or almost one half of the population, are in some form dependent on government spending. This puts enormous pressure on politicians to increase deficits and taxation while supporting a Federal Reserve stimulus policy that debases the currency, robbing citizens of purchasing power.
Average wages, although more than 12 percent higher than at the recession's trough, are still about 3.5 percent below their 2008 high. And government Social Security handouts, including food stamps, are up by almost 20 percent in just the past year.
Despite government aid, consumer demand has remained muted and has lifted real wholesale and retail sales by only 12 percent, leaving them at 4 percent below their 2008 peak.
While industrial production is still about 3.5 percent below its 2008 peak, it has held up remarkably well. This may be caused in large part by a weaker dollar, increased demand from emerging economies overseas and a slight increase in domestic borrowing.
Can this weak recovery continue, translate into jobs and lead to renewed consumer demand?
The level of the new orders to be reported in the next Purchasing Managers Index will provide a sign. Unfortunately, five of seven recent surveys of manufacturing activity indicate a downturn. This happened last in early 2008.
European economies are careening toward a depression, Japan's remains stagnant and China's is weakening, which is probably drawing down activity in major nations such as Russia, India and Brazil.
The American economy is growing. It may be enough to discourage additional stimulus from the Federal Reserve, but it is unlikely to create enough jobs to revive healthy consumer demand.
John Browne, a financial analyst and former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Email him at: firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Driller preps for Forward decision
- Library tax adds to West Homestead budget
- Experience the best teacher for Clairton student
- McKeesport center part of Cal’s digital storytelling class project
- Versailles fire displaces couple on Third Street
- Steelers notebook: Roethlisberger comes to Haley defense again
- Steelers defense’s rapid decline looks similar to that of Steel Curtain’s
- PNC plans to do away with tellers
- Help on deck to help Jeannette deal with Monsour, nearby buildings
- NFL notebook: Packers QB Rodgers still feeling pain, may sit another week
- Jeannette alerted to police costs