The Economy: Growth Has Been Weak But Long-Lasting
1. Why This Economic Recovery Has Been So Disappointing
2. The Fourth Longest Economic Expansion on Record
3. One Chart Shows Why So Many Americans Feel Poor
Forecasters who were predicting a surge in the economy in the second half of this year have revised those estimates much lower in recent weeks. It now looks like the economy may not achieve even 2% growth this year. Today, we’ll look at some of the reasons why.
While economic growth has been anemic, the recovery since mid-2009 has been the fourth longest in history. Since World War II, the American economy has typically grown for about five years on average, as shown below, and then had a contraction. This expansion, which officially began in June 2009, is already over seven years old.
Increasing numbers of Americans feel “poor.” I will provide one particular chart today which illustrates why so many people feel that way today. I think you’ll find it very interesting. Let’s get started.
Why This Economic Recovery Has Been So Disappointing
The US economy grew at an annual rate of only 1.1% in the first half of this year. That was well below predictions late last year of 3+% growth for all of 2016. Likewise, many forecasters suggested that GDP growth would surge in the second half of this year. But as I wrote last week, most predictions of 3-4% growth in the second half have been pared back to around 2%.
This has been a distressingly consistent pattern in recent years. With the exception of a strong quarter here and there, economic growth has been stubbornly disappointing ever since the Great Recession ended in mid-2009. Growth in US gross domestic product has averaged only about 2% since then, compared with4.6% on average during the recovery following the recession of the early 1980s.
The problem goes beyond the current recovery and beyond the US. For most of the 21st century, the developed world – the US, Western Europe and Japan – has been stuck in a pattern of slow economic growth. In the US, the boom of the late 1990s ended with the bursting of the dot-com bubble; the recession that followed was relatively mild, but the recovery was weak. It took another bubble, that time in housing, to get the economy moving again. And as we all know, that bubble ended with the Great Recession and a financial crisis.
Economists aren’t exactly sure what’s behind the prolonged global slowdown. Aging populations certainly play a significant role – more retirees means fewer people working, which, all else being equal, means less economic growth.