WASHINGTON – Despite evidence to the contrary, most media tell us that all is well with the US economy. The subtext is that the worst post-recession recovery in history is now the accepted “New Normal”. Therefore what we used to call disappointing mediocrity is in fact good. Likewise, low growth rates are impressive. Overall, as a buoyant stock market indicates, we are clearly headed higher.
Slow growth is the norm
Here are the facts. The stock market levels are artificial. Everybody knows that current high valuations are largely the effect of zero interest rates mandated by the US Fed that have “forced” investors to buy stocks, as there are no viable alternatives left. Therefore, since all investors are buying stocks, we have inflated Wall Street valuations.
Regarding macro economic data, in the second quarter of 2015 the US economy grew by 2.3%. This is by no means terrible. But it is bad compared to a post war 3% average. Sure enough, we are growing, but at a rate that is about 30% less than what used to be considered the norm.
So, which is which? Are we saying that the post war average was an aberration? Are we saying that growth around 2% is just about right, the best that we can do?
Well, if you look at the headlines announcing just released second quarter GDP figures, the implicit message is that US mediocre performance is actually quite good.
Reuters: “Consumer spending bolsters US second quarter growth”, The Washington Post: “US economy expands at 2.3% in second quarter, picks up speed”. USA TODAY: “Economy bounces back”.
Look, let’s be clear, these are not lies. They are however embellishments. It is true that the US economy has done better in the second quarter of 2015. But then you have to point out that the ultra-anemic 0.6% growth we had in the first quarter was really bad.
Whichever way you look at this, the media have become cheerleaders of an economy that by any measure is under performing. Average growth is lower than the post war average. The number of Americans with a job as a percentage of the working age population is lower. Unemployment is finally almost back to historical average; but only if we agree to count as employed millions of people who have part-time jobs, while they would like to have full-time employment, and if we agree to exclude from the ranks of the unemployed millions who have dropped out and so are no longer counted.
Once again, this is not a “glass half full or half empty” debate. This is about recognizing what consistently mediocre data, year after year, tell us. America is slowly but clearly sliding into what I would call “European mediocrity”.
2.3% growth in the second quarter, coming after 0.6% growth in the first gives you less that 1.5% for the first half of 2015. It takes heroic optimism to label these disappointing numbers as an indication that the overall economy is “picking up speed”.
Denial is the worst problem
Here is the thing. We have actually two problems. Number one: for a variety of reasons we have lost our past economic vigor. Number two: our elites –the experts whom we rely upon– tell us that all told we are still doing pretty well. Nothing to worry about.
And I suggest that this is the worst problem. We are slowly going down, and we are told by the experts that we are alright, in fact we are trending up.