Our Weak Economic Recovery
May 9, 2014
Economic growth since the end of the financial crisis has been significantly weaker than in other recoveries, writes John Makin, resident scholar at the American Enterprise Institute.
June marks the fifth year of economic recovery since the 2008 financial crisis, and the "recovery" has been unimpressive:
- Compared to other post-World War II recoveries, growth since June 2009 has been considerably poor. With the exception of two quarters, growth has been below average.
- Investment has also been below average, as investor uncertainty -- especially in health care and financial services regulation -- has risen. Uncertainty has been so severe that even zero interest rates have been unable to encourage investment.
- Usually, 4 percent of the rise in household wealth is spent, and household wealth in the U.S. has increased $25 trillion over the last several years. However, consumption has not recovered at the rate that would be expected alongside the wealth increase.
- Employment growth has also been weak. Companies have been able to utilize labor-saving technologies, shifting income distribution towards capital.
What can we expect in the months ahead? The Federal Reserve is predicting 3 percent growth for 2014 -- wishful thinking, Makin says. With a flat stock market and a housing sector that is beginning to cool off, the U.S. needs stronger levels of investment, consumption, and exports. For a real recovery, the U.S. needs corporate tax reform, Makin says, and it needs a government that understands the burdens created by regulation.
Source: John H. Makin, "The limp economic recovery, five years on," American Enterprise Institute, April 29, 2014.
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