Is the U.S. economy permanently 'stuck in the mud?'

By Catholic Online (NEWS CONSORTIUM)
8/2/2012
Catholic Online (www.catholic.org)

Economy continues to chug along at weak 1.5 percent annual pace

Federal Reserve policymakers seem resigned to the fact that the plodding U.S. economy may be out of reach to change. After a two-day meeting, Fed Chairman Ben Bernanke told Congress that there are too few options to speed up an economy that may be "stuck in the mud."

Even those who are employed in the U.S. find themselves looking nervously over their shoulders.

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LOS ANGELES. CA (Catholic Online) - "The problem is the things that are holding back the economy -- the uncertainty about tax rates next year, the problems in Europe and the problems in Asia -- are absolutely nothing that U.S. monetary policy can address with the tools it's got left," John Ryding, chief economist at RDQ economics said.

Central bankers are giving thought to the option of buying more long-term bonds to keep interest rates low, but even these measures are not expected to be announced when the Fed this week.

While growth has slowed sharply from a surge late last year, the expansion continues to crawl along at a lethargic 1.5 percent annual pace.

The slow growth avoids the technical definition of recession, but the snail-like pace of hiring makes it feel like a downturn for the 12.7 million American workers without work.

Some experts fear the economy may be permanently stuck in slow-growth mode.

"We do think we've seen more permanent changes in the economy as a result of this recession," Michelle Meyer, an economist at Bank of America Merrill Lynch says. "We estimate potential growth to be at about 2.25 percent, whereas back in 2005 we were saying it was about 3.5 percent."

The numbers of Americans who have left the workforce include many older workers who are gone for good. The pace of growth will be held back as long as an aging baby boom population continues to leave the workforce and cut back on spending.

People in the U.S. who are working feel little job security. "People aren't necessarily panicked to lose their job, but they're not really confident enough to borrow a lot and spend a lot," Richard Hoey, chief economist of BNY Mellon says. "We're expansionary at a subpar pace. We're not going into a recession but sure aren't going into a boom, either."

It may be a long while before U.S. consumers begin spending again at levels usually expected in a recovery.

This far into the previous five recoveries, the economy was expanding at an average pace of 4.4 percent, twice the current average. The biggest single missing growth component is consumer spending.

In lieu of a sudden uptick in new hiring, consumers aren't likely to resume spending at historical levels, especially as households continue to work off a surge in credit card and mortgage debt that preceded the financial collapse of 2008.

� 2012, Catholic Online. Distributed by NEWS CONSORTIUM.

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Keywords: Economy, joblessness, no job creation, Federal Reserve

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1 - 4 of 4 Comments

Gwendolyn D
9 months ago
It seems sad and also un-Catholic to me that our only hope out of this recession is for people to get spending. I am not educated in in economics, but it seems our problem is not that people need to get spending but that people need to be loving. There is too much greed and self serving that is going on and it is collapsing the whole system. Couldn't people go back to a basic, family based morality and it would solve the whole problem too? Could we not love God and neighbor and have that bring us back? I don't see how just spending is going to solve our problems. It still won't offer a man a secure job with full time pay with benefits, a real living wage if the employer is greedy. Then we will just have the rich getting richer off the poor who are at the rich man's mercy.If families keep ending up in divorce, then we become 2 household instead of one and now a job that could be had is being taken up by a wife who actually might want to stay home and raise her own kids but has to work because she is a single parent with bills. I know this is not a popular thought with many. But what are the fruits? Are things working for families, kids, future generations- for any of us right now? I think we as a country really need to get back to basic values and to God!
Rob
9 months ago
vance, I agree. And I would argue that this was actually always there. The only thing that was propping us up was the nonsense of wall street. Between the trading in phony securities which fueled the ridiculous real estate market we had....when all that popped, so too did all the jobs related to it.

The only thing we make anymore are financial products. It's the only sector of the economy our government really cares about. We don't make anything anymore and we've become nothing more than peddlers and consumers of cheap crap made by countries we call enemies. Government benefits (unemployment, food stamps and the like) are probably the only thing that is keeping this country from going into armed revolt. Why do you think Romney isn't releasing those tax returns???
JaKaye
9 months ago
The biggest blame for this mess we're in lies in the hands of not only the banks and securities exchange companies, but in big oil. Years of favorable legislation put American oil companies on top of the world economic giants of the industry. That came at the cost of the US consumers. Today, we see any slight problem, such as a pipeline break in Wisconsin affecting costs not only in WI., but in all the areas served, including states around that area. You can bet the oil co-op will take in profits many times over the cost of fixing the problems. These same companies demand the Feds help build new refineries, while profits such as this go where? In the pockets of the fat cat oil company owners. Greed and greed alone has the US nearly destroyed, and unless change comes soon, it will only get worse and worse for the regular people. We have moved through change that during the past few decades, had made the US a totally different country. Loss of rights, prosperity, and the basic freedom & justice we have a constitution to go by, is no longer being enforced or endorsed. It's time to get back to the basics...
Vance
9 months ago
We are in a Great Depression. We are not in a recession. If we want to compare apples to apples, there would be millions of people in the streets if it wasn't for Obama ordering the banks not to foreclose on homes and doling out millions of food stamps. That's why there are no "Soup Lines" or "Hoovervilles". But the massive unemployment and poverty are there.

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