Numbers released last week indicated a welcome increase of 255,000 jobs nationwide. But fundamentals in our economy are still far from what they could – or should – be.
Most concerning is that the U.S. economy grew at just 1.2 percent in the second quarter of this year. This, on the heels of a first quarter results that have been revised downward by the Commerce Department — from 1.1 percent to 0.8 percent.
According to the Washington Post: “Economists surveyed by Bloomberg had expected that the United States’ GDP grew at a 2.5% annualized pace in the second quarter.” So that projection was cut in half in reality. And keep in mind that the non-partisan Congressional Budget Office had predicted in January of this year real economic growth of 2.7 percent for this year.
The Post also observed, “For three consecutive quarters (GDP) hasn’t topped 1-1/2 percent. The nation hasn’t seen such a meager stretch since 2009.”
All of this means that when it comes to a lackluster recovery eight years after the financial crisis, the (down)beat goes on.
The Wall Street Journal last week reported that, “Economic growth is now tracking at a 1% rate in 2016 – the weakest start to a year since 2011 – when combined with a downwardly revised reading for the first quarter. That makes for an annual average rate of 2.1% growth since the end of the recession, the weakest pace of any expansion since at least 1949.” That means, if you’re younger than 68 years old, you haven’t lived through a recovery this anemic.
Moreover, according to the Journal, in the 7 years since emerging from the recession, annual growth has averaged just about 2 percent.
I have observed many times how economic growth is key, citing an analysis from economist Douglas Holz-Eakin, who advised Senator John McCain during his campaign for President. Holz-Eakin found that, at the post-World War II rate of expansion of 3.3% GDP growth, your salary will double every 30 years. At 1.5% GDP growth, it would take 93 years. And growing at even a 3% rate over the next ten years would mean 1.2 million additional jobs.
Now, from the other side of the political spectrum, Lawrence Summers, former U.S. Treasury Secretary and economic advisor to President Obama, wrote the following on August 7 in the Washington Post:
“…the single most important determinant of almost every aspect of economic performance (is) the rate of growth of total income, as reflected in the gross domestic product…The reality is that more growth means more employment.”
He went on to state: “The reality is that if U.S. growth continues to have a 2 percent ceiling, it is doubtful that we will achieve any of our major national objectives. If, on the other hand, we can boost growth to 3 percent, interest rates will normalize, middle-class wages will rise faster than inflation, debt burdens will tend to melt away and the power of the American example will be greatly enhanced.”
The question, as Mr. Summers notes in his piece, is how to achieve this growth.
Certainly, there can be vigorous and legitimate disagreements on policy. That is to be expected, and can be healthy. But the missing ingredient thus far has been a willingness in Washington to work through and, ultimately, transcend those differences. Without elected officials who are willing to take that step, we should all be concerned that America’s economy, and our standard of living, will continue to be shortchanged. And that is a fate we should be ardently unwilling to accept.