Posted in News, Statistics

The Continuing Unsatisfactory Economic Expansion

Consumer spending is up, but we still have far fewer jobs than when the recession started.

(PHOTO: BACHO/SHUTTERSTOCK)
August 7, 2013 •

Media and policy-makers seem anxious to convince us that the economy is in strong recovery mode, therefore, no further significant policy interventions are needed.

Their optimism appears to rest heavily on the recent acceleration in consumer spending. After all, there are strong reasons for concern with the other major sources of growth: government spending on all levels is being cut, exports face a weakening world economy, and business investment remains largely stagnate.

But there are also strong reasons to challenge this optimistic view of consumer spending as a growth engine. The charts below, from a Wall Street Journal article, highlight some of the most important.

As we see below, while consumption spending is indeed accelerating, after tax personal income is falling. In other words, there appears little reason to believe that there is a solid foundation for sustaining this trend.

recovery-1

Additionally, after four years of recovery we still have 2.4 million fewer jobs than we had at the start of the recession. Moreover, as we see below, there has been no real wage growth. In fact, real average wages have fallen for most of the so-called expansionary period.

recovery-2

Yes, housing values are finally starting to rise and household debt payments as a share of after-tax income are declining. But to a large extent the new burst in consumption spending has more to do with renewed borrowing than solid gains in job creation and income.

Unfortunately, there is little reason for us to have confidence that the economy is gathering strength in ways that will be sustainable or benefit the great majority of working people.

 

Advertisements

Author:

Protecting the Rural Culture and Environment from Elitist Metrosexuals.... "When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe ." -- Thomas Jefferson

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s