The Economic Recovery That No One Noticed

The average recovery since the end of World War II has been 58 months.  The current “recovery” has just reached that milestone.

So maybe we should be celebrating.  But what’s to celebrate?econ_expansion25_405

If you were to define “recovery” as a period when gross domestic project (GDP) increases from one quarter to the next, yes, we’ve been in a recovery.  But a recovery is typically reflected by a period that also includes, among other things, low unemployment, strong consumer spending, increasing income, higher inflation and strong manufacturing.

Most of those signs of recovery have been either barely visible or missing, and GDP has been growing about as fast as a bonsai tree.

This has been, and will likely continue to be, the recovery that no one noticed.  It’s a recovery in name only, as for most Americans it doesn’t feel much different than a recession.  Consider what’s been happening:

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Goodbye, Middle Class

With all of the talk in Washington about equality, you have to wonder how the gap between rich and poor has widened to the point where even The New York Times is questioning the future survival of the middle class.

Disposable Income

Some have, indeed, made the transition from middle class to upper class and are enjoying a more comfortable lifestyle.  They may not be part of the 1%, but they’ve broken away from the middle.

The New York Times noted that, “In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995 … Even more striking, the current recovery has been driven almost entirely by the upper crust … Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.”

Put aside your class envy for a minute, though, and recognize that consumer spending by the top 5 percent is keeping the economy out of a recession – albeit, the current recovery has been so weak we may as well be in a recession.

The Great Divide

And while some are moving up, many more are falling down, creating a greater divide than ever between rich and poor.  Consider a few statistics from a cheery blog called, The Economic Collapse (and republished on Zerohedge):

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Another Record Smashed: More Than 100,000,000 Americans Not Working

The Labor Force Participation Rate has fallen and it can’t get up.

The U.S. Bureau of Labor Statistics (BLS) reported this week that 90,609,000 Americans who are 16 or older are neither working nor looking for work.  Only 63.2% of Americans are working or looking for work.  Anyone who is unemployed who has looked for a job in the past four weeks is counted as participating in the labor force.

LFPRAdd in unemployed Americans who are looking for work and the total exceeds 101 million.  With a total population of about 313,914,040, nearly one American in three is 16 or older and is not working.

The Labor Force Participation Rate peaked at 67.3% in 2000 and it hovered around 66% in 2007 and 2008, when the financial crisis began.  Now, after five years of stimulus spending and quantitative easing, it has dropped about 3%.  In July, the number of nonparticipants climbed by more than half a million.

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The Off-On-Off Economy

The economy recently has been full of stops and starts, ups and downs, good news and bad news.

Optimists will say that progress is being made, as we’ve moved beyond the all-bad-news days of 2007 and 2008.  Those of us who are less than optimistic would instead ask why it’s taken five years to get to the current dismal economic state.

Recovery always seems to be just around the next corner.  But the world is round and there is no next corner.

Zerohedge recently ran a series of 13 charts showing that any economic exuberance is irrational.  The charts compare the current “recovery” with four previous recoveries.  The trend lines in most cases are almost identical – except that the lines representing the current Keynesian-inspired recovery are well below the lines representing the previous four recoveries.  They show that:

  • Growth in gross domestic product is pitifully low.  If it were a patient, GDP would be signing up for hospice care.
  • The ISM Manufacturing Index has fallen significantly from two years ago.
  • Business inventories have risen significantly, signaling that new orders will likely drop.
  • Productivity is down, consumer spending is lackluster and housing starts, though improving, are nowhere near what they should be if the housing market were really recovering.

But cheer up … vehicle sales are up!  The recovery must be just around the next corner, wherever that is.

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The Unnoticed Recovery

It seems that every day we hear about a stronger economy with real jobs, a recovered housing market and renewed manufacturing strength being just ahead.

We hear about it.  We just don’t see it.

The economy’s been growing for four years now, yet its growth has been so stunted, most of the country still thinks we’re in a recession.  The McClatchy-Marist Poll this week found that 54% of adult Americans think the U.S. in still in a recession, while only 38% think it’s not.

In an economy with a 7.6% unemployment rate (but really more than 14%), any sign of improvement is good news, so we can be thankful that the number of people who think we’re still in a recession is down from 63% in March and 75% in 2011.

Only 29% of those surveyed think their family finances will improve in the coming year, while 19% think they will worsen.  More than half think they will remain the same.

Lee M. Miringoff, Director of The Marist College Institute for Public Opinion, treats the poll results as good news and notes that “President Obama plans to refocus his second term agenda on the economy.”

Well, that should save the day.  Except that a separate poll finds that Americans have little faith in their political leaders.

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Key Indicators Negative Across The Board

The worst things get, the more they stay the same.

As the stock market continues to set records, the latest Philadelphia Fed Business Outlook Survey shows that the business outlook for manufacturing is weakening.  Of course, that could help continue to boost the market, since it gives The Fed an excuse to continue its quantitative easing.

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The Black Cloud in the Silver Lining

All I want for Christmas is a new economy.  Ours is broken.

While there are a few positive signs that optimists can latch onto, it appears that either the country will go over the fiscal cliff or virtually no cuts will be made in the $3.8 trillion federal budget.  If nothing else, current spending should prove that Keynesian economics doesn’t work.  With a fourth consecutive deficit exceeding $1 trillion, optimists take as good news a drop in the unemployment rate from 7.9% to 7.7%.  Considering the federal spending that has taken place in recent years, wouldn’t the economy be booming now if Keynesian economics really worked? read more

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WOW! Manufacturing Index Up 0.2%!


“Been down so long, it looks like up to me.”

Furry Lewis

This is what passes as positive economic news these days: The Institute for Supply Management’s (ISM) reported Thursday that its index of purchasing managers edged up to 51.7% from 51.5% in September.

Wow!  A whole 0.2% gain!

Yet it was positive enough to send the Dow Jones Industrial Average up 1% (136.16 points) yesterday, in the last Thursday before the Presidential election.

It was the biggest gain since the latest round of quantitative easing (QE3) was announced on Sept. 13, 2012 – but it doesn’t erase the market drop that has taken place since then. read more

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News You May Have Missed

With the election season in full swing, dominating the airwaves, Internet and print media, you may have missed some of the other news from the past week.  Here are a few lowlights:

What Recession?  We recently reported that the unemployment rate miraculously improved to under 8% just before the election.  Now, according to a preliminary report, annual growth in gross domestic product (GDP) is miraculously above 2%.

An unemployment rate under 8% is none too impressive and neither is a growth rate of just above 2%, but we live in times of low expectations – and these benchmarks, if achieved honestly, would indicate that the economy is moving in the right direction. read more

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Unemployment Drops … Just In Time for the Election!

The unemployment rate has finally dropped below 8% to 7.8%!  Or has it?  Really?

The latest numbers are a head scratcher.  The Bureau of Labor Statistics (that’s BLS, not BS) reported that only 114,000 non-farm payroll jobs were added in September.  That’s well below the 206,000 increase in the working age population.

As we’ve previously reported, the overall unemployment rate has been dropping not because new jobs are being created, but because many people have stopped looking for work or are underemployed in part-time jobs. read more

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