Slug­gish but durable: 5 things about US eco­nomic ex­pan­sion

Kuwait Times - - BUSINESS -

The US econ­omy ac­quired an ex­clu­sive la­bel Fri­day: Re­ces­sion-free for eight full years. Yet the third-long­est eco­nomic win­ning streak in Amer­i­can his­tory still doesn’t get much love.

No won­der: De­spite its longevity, this ex­pan­sion has de­liv­ered sub­par gains in its pace of growth, full­time hir­ing and pay in­creases since it emerged from the wreck­age of the Great Re­ces­sion in June 2009. It’s the weak­est eco­nomic re­cov­ery since World War II.

And the gap be­tween the rich­est among us and ev­ery­one else has widened. Still, the econ­omy is hardly the disaster that Pres­i­dent Don­ald Trump in­sists he in­her­ited. Em­ploy­ers have been hir­ing steadily, month af­ter month, since 2010. A ma­jor­ity of Amer­i­cans now en­joy un­usual job se­cu­rity. The gov­ern­ment es­ti­mated Fri­day that the econ­omy grew at a 2.6 per­cent an­nual rate from April through June. It wasn’t siz­zling. But just the fact that the econ­omy has sus­tained its growth since mid-2009 rep­re­sents a ma­jor sta­tis­ti­cal mile­stone. Here are five things to know about the ex­pan­sion as it trudges into Year 9:

It’s got stay­ing power

The Na­tional Bureau of Eco­nomic Re­search has been mea­sur­ing US re­ces­sions and ex­pan­sions since the 1850s. Over that time - from Pres­i­dent Franklin Pierce’s ad­min­is­tra­tion to Trump’s - only two ex­pan­sions have matched the life­span of the one that of­fi­cially be­gan in June 2009 and has en­dured for 96 months: A 106-month ex­pan­sion that ran from Fe­bru­ary 1961 to De­cem­ber 1969, when Pres­i­dent Lyn­don John­son stoked growth with spend­ing on do­mes­tic pro­grams and the Viet­nam war.

And a 120-month streak that be­gan in March 1991 and ended in March 2001, af­ter the dot­com bub­ble burst. What’s more, the job mar­ket has en­joyed a re­mark­able run: Em­ploy­ers have added jobs for 81 straight months - eas­ily the long­est streak on record. And the num­ber of Amer­i­cans ap­ply­ing for first-time un­em­ploy­ment ben­e­fits has stayed be­low 300,000 for 125 straight weeks. That’s the long­est such streak since 1970, when the pop­u­la­tion and work­force were much smaller.

It’s no boom

Com­pared with the other two long-last­ing ex­pan­sions, the cur­rent one looks, well, weak. Amer­ica’s gross do­mes­tic prod­uct has grown less than 19 per­cent over the past eight years - much less than the 51 per­cent growth posted in the first eight years of the 1961-1969 ex­pan­sion and the 34 per­cent in the same span of the 1991-2001 ex­pan­sion.

Job growth has been con­sis­tent but hardly ro­bust. A big rea­son is just how bleak the job pic­ture was eight years ago. The Great Re­ces­sion wiped out 7.4 mil­lion jobs. And the job mar­ket didn’t ac­tu­ally hit bot­tom un­til Fe­bru­ary 2010 - eight months af­ter the re­ces­sion ended.

Over the past eight years, the num­ber of US jobs has risen just 12 per­cent to 146 mil­lion. Over the same span, job gains had surged 30 per­cent in the 1961-1969 ex­pan­sion and 18 per­cent in the 19912001 ex­pan­sion.

The cur­rent re­cov­ery was stunted at the out­set by lin­ger­ing wreck­age from the fi­nan­cial cri­sis. Con­sumers stopped bor­row­ing af­ter hav­ing charged too much on their credit cards and hav­ing watched their home val­ues sink. Banks, strug­gling with bad loans, tight­ened credit.

Since then, the ex­pan­sion has been hob­bled by a slow-grow­ing la­bor force and by a puz­zling slump in worker pro­duc­tiv­ity, which is the amount of out­put pro­duced, per hour worked.

Job growth ex­ceeded 200,000 a month in 2014 and 2015 but has been trend­ing lower - 180,000 a month so far this year - in part be­cause there are fewer peo­ple who want or need a job.

“The la­bor mar­ket is pretty healthy,” says Robin An­der­son, se­nior econ­o­mist at Prin­ci­pal Global In­vestors. “But over the last cou­ple of years, we have def­i­nitely moved to a slower pace of job growth.”

Govt hasn’t helped much

Gov­ern­ment spend­ing and in­vest­ment usu­ally play a vi­tal role in restor­ing eco­nomic health af­ter re­ces­sions. Faced with the deep­est down­turn since the 1930s when he took of­fice in Jan­uary 2009, Pres­i­dent Barack Obama pushed through Con­gress an $862 bil­lion stim­u­lus pack­age. Many econ­o­mists credit the blend of tax cuts and spend­ing in­creases, in no small part, for re­viv­ing the econ­omy.

But once Repub­li­cans won the House of Rep­re­sen­ta­tives in 2010 and the Se­nate in 2014, they proved re­luc­tant to com­mit to more spend­ing at a time when bud­get deficits were soar­ing. Like­wise, state and lo­cal gov­ern­ments cut back. The re­sult was that gov­ern­ment spend­ing and in­vest­ment at all lev­els - fed­eral, state and lo­cal - dropped 6 per­cent in the first eight years of this ex­pan­sion. By con­trast, gov­ern­ment spend­ing had risen 43 per­cent in the first eight years of the 1961-1969 ex­pan­sion and 7 per­cent over the same span of the 1991-2001 ex­pan­sion.

Gov­ern­ment pay­rolls have dropped 1 per­cent since June 2009. They had risen 42.4 per­cent in the first eight years of the 1961-1969 ex­pan­sion and 9.1 per­cent this deep into the 1991-2001 ex­pan­sion. — AP

MI­AMI: In this Oct 6, 2015 file photo, job ap­pli­ca­tions and in­for­ma­tion for the Gap Fac­tory Store sit on a ta­ble dur­ing a job fair at Dol­phin Mall in Mi­ami. — AP

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.