Whither the Recovery?
For an economy in recovery, depressing economic news is all around us, it seems. In the past few weeks we’ve been told our home values have declined to 2002 levels. Unemployment ticked up to an official 9.1%, although the majority of non-governmental analysts tell us the real unemployment number is closer to twice that. More Americans are losing their jobs, as 7 of the past 9 weeks have seen new unemployment claims exceeding 400,000. For the fortunate few who are able to find work, they are winding up in the McJob industries. Of the 54,000 jobs created in May, 62,000 were actually McDonald’s hires.
You do the math: McDonald’s hired 62,000. Take away those menial, low-paying, no benefit jobs and the economy actually lost 8,000 jobs. For anyone aspiring to middle class, a McDonald’s job is not exactly high on the career path, either.
We’re told that economic growth has been muted. The truth is, there hasn’t been any real economic growth during the Obama administration. What we’ve experienced is a decline in the rate of recession. In other words, we’re still in an economic slump, it’s just not as bad as it was at the end of 2008. Let me explain, using the charts below. First, is quarterly GDP or the net worth of all goods and services produced:
Yes, that’s right. In the 6 quarters the US economy has been recovering, the net gain in GDP amounts to $900 billion. Under the technical definition of a recovery, even this paltry real rate of growth (about 1% per quarter) qualifies. Yet, inflation over that period remained higher than the growth in GDP. Mind you, these are the Fed’s own numbers:
Why is this notable? If inflation is growing faster than the value of goods and services, then GDP growth has come as a direct result from inflation. In fact, if you readjusted GDP growth to account for inflation, you get this:
And if you look at the growth curve over this same period, you get the dreaded upside-down smiley face:
We’ve never actually any real growth, despite what the spinmeisters in Washington would have you believe. When accounting for the effects of inflationary fiscal policy by both the government and the Federal Reserve, the best the economy has managed is two quarters without decline. The next time you find yourself wondering where the “recovery” is and why it’s left you behind, don’t feel so bad.
There never was one.