Amid the Gloom, U.S. Economy Quietly Improves
Despite all the negative news, there are signs the U.S. economy is doing better than at any point since 2007, says Zachary Karabell.
With the seemingly endless cacophony of negative news about the parlous state of the globe, you would never know that over the past two months the statistical entity known as the U.S. economy has been doing rather well.
For the past few years, we have been in a grinding recession or at best a recovery that feels like a recession. It has been so long since anyone can recall a period of modest stability and growth that we have become inured to signs that things might be considerably better than at any point since 2007. And in fact, given that there is no housing bubble waiting to pop, we are now arguably in a better position than at any point in the new millennium. In its final statement before the end of the year, the Federal Reserve described the economy as “expanding moderately.” Almost all major statistics suggest that “moderately” may be an understatement. Manufacturing surveys such as those conducted by the Institute for Supply Management have been above 50 for months, which indicates growth. The same goes for service-sector surveys. The overall economy as defined by GDP figures has been in the range of 2 percent, not great, but also not artificially inflated by too-easy credit, as was the case between 2004 and 2007. Incomes are flat or slightly down, but savings are up, which shows that the vast majority are living within their means and making solid choice about the lives.
Unemployment remains high, and structural, but also stagnant. Job gains are minimal, but so are job losses. And consumer sentiment, a fickle barometer, but indicative of moods and expectations, has been slowly creeping up against a tide of negative views about the U.S. and the world emanating from politics, Wall Street and the media. Not one of these statistics is without problems, ranging from how unemployment is officially defined and calculated (You are not counted as unemployed if you are so discouraged that you have stopped looking for a job.) to the way that GDP figures treats all spending as positive without any consideration of whether that spending adds much in the long run. A dollar spent at Denny’s is worth the same as a dollar spent on education in GDP calculations, even though the latter has greater long-term worth. Still, insofar as our national conversation of how we are doing is shaped by these statistics, it is striking how at odds they are with the tone. The numbers are OK and getting better. The national discussions is grim and getting grimmer. One gut reaction may be that the statistics only gauge certain aspects of economic life: manufacturing, how big companies are doing, cold numbers measuring expansion or contraction annually with no real relationship to how tens of millions of families actually live and manage on $50,000 a year or less in a world of uncertain healthcare costs, few retirement benefits, and seemingly constant and bewildering change. There also is the fact that, save for a brief few years in the mid-2000s, the past decade or more has been a grind for most Americans and most residents of the world formerly known as developed. The giddy enthusiasm of the 1990s is now a distant memory, tinged by the stock market crash of 2001-2002, and the scandals of Enron and WorldCom. And the years after—with terrorism and wars in Iraq and Afghanistan, the rapid rise of China, the financial panic of 2008-2009, and now the the threat posed to the utopian experiment of the Eurozone coloring financial markets red, along with a domestic American political debate that avoids long-term solutions in favor of short-term polarization—have hardly nurtured a sense of optimism about the present or the future. In that sense, it will take more than a few months of good data to penetrate the national gloom. And in a globally-interconnected system, even though most Americans are only marginally tuned in to what is happening in Europe, the struggles of the world’s second-largest economic bloc are doing nothing to ease the pressures on our economy, on the psyche of markets, and the availability and demand for credit and capital to invest in the future. It is easy to come up with reasons why the stream of better news about our economic system has failed to dispel the widespread sense that all is not well and getting worse. But more interesting is that in spite of how gloomy we seem to be, the vast majority are simply going about their lives and plugging away at their hopes and dreams with less bitterness and less edge than the frantic tones of the media and the harsh patois of political discussion. The results of that plugging away are reflected in the numbers that have trickled out steadily over the past months, which paint a picture of a different 99 percent than that described by the wave of protests that have garnered such attention. It’s a picture of a country more sober and stable, more pragmatic and perhaps less idealistic, more disillusioned with the collective and its future, yet still individually hopeful. As yet another grinding, challenging year comes to an end, that reality and those imperfect data points provide a glimmer of hope that the future being constructed is more solid than at any point in decades. The size of the public debt or the corruption of Wall Street and politics generate heat and noise, but the real dirty little secret of the American economy is that we are doing OK. That is a far cry from great and shy of spectacular, but it ain’t bad.