It goes without saying that the economy is the number one issue on the minds of Americans and will be at the top of their list during this election year. So what do we have to look at between now and November to gauge its impact?
The June jobs report left little to be questioned on the nation’s economic recovery. May reported the smallest increase in jobs for the year. Consequently, the unemployment rate rose to 8.2 percent from 8.1 percent. The stock markets, of course, are always susceptible to the nation’s overall mood on the economy and with few jobs being created and unemployment lines getting longer, the markets tumbled.
How do we compare our current recession to those in the past? If we consider that America’s average annual growth rate for the economy from 1947 – 2007 is 3.4 percent, than 2011’s paltry growth at 1.7% looks abysmal. Furthermore, based on early numbers for 2012, the growth rate looks to be at about the same percentage of growth as it was for 2011. Historical trends suggest that a recovery period follows a recession because of the untapped resources, both in labor and material. Since we have not seen any sign of a recovery, one can only conclude that our recession is ongoing and all the recent means by the Obama administration to generate economic activity have failed.
The Congressional Budget Office and the staff of the Joint Committee on Taxation recently estimated that the stimulus actually had a net loss in jobs created when factoring that it failed to create the number of jobs envisioned and the actual unemployment rate rose from 200,000 to 1.5 million. This is despite spending nearly $1 trillion in the stimulus package, a proposal by the Obama administration that promised to lower the unemployment rate and create jobs. If the rise in unemployment is factored in, along with the total cost of the stimulus, the jobs that were actually created from the stimulus cost an estimated $4.1 million per job. Furthermore, the same agencies listed recalculated the estimates of the stimulus and concluded that the deficit will increase by about $831 billion over the 2009-2019 period, as opposed to the original estimate of $787 billion over the same period.
In comparison to the double-dip recession during 1977-1982, and the subsequent recovery, America’s economy seems terminal. The two years following 1982 saw an annual increase of 6 percent and by the time the decade came to a close, everything lost in the recession had been regained. Unfortunately, economists are unable to even forecast a period of growth, let alone predict a full recovery period for this recession. The model looks eerily similar to Japan’s economic crisis during the 1990’s, dubbed, “The Lost Decade.”
With massive debts and budget deficit spending forecasted, it is understandable that economists find difficulty in constructing a favorable model for the economy. Moreover, these negatives factor in as growth impediments and cast doubt on America’s recovery. That last point is psychological but that doesn’t mean it is left out of consideration. Investors and entrepreneurs need favorable conditions so that the engine of the economy slowly begins to rollover again creating productivity and wages.
President Obama considers all the lessons that can be learned from the past recessions and subsequent recoveries as just a “theory [that] fits well on a bumper sticker … it has never worked.”