I didn’t comment yesterday on the BEA’s preliminary report on U. S. gross domestic product for the first quarter of 2014 which was flat. Here are Megan McArdle’s observations:
No, despite the caveats, the fact remains that we seem to be stuck. Six years after the financial crisis, we still haven’t entered anything that could really be called a “recovery.†A recovery would mean some sort of catch-up growth that reabsorbed stranded workers and capital. Instead, we’re barely limping forward, and the most cheerful thing we can say about any of it is that at least we’re no longer falling back.
The reason I didn’t comment is that I don’t much care about GDP. As far as I’m concerned real GDP could be flat for the next decade and I wouldn’t care as long as the economic indicators that I do care about are rising.
Those indicators are real median household income which has declined substantially since 2009 and shows little sign of recovering and job growth which is phlegmatic at best, morally reprehensible, and disastrous for those who’ve been unemployed for so long.
Touting GDP growth (not to mention a rising stock market) in the face of persistent long-term unemployment and declining real household income is an objective endorsement of increasing income inequality. Decrying income inequality on the one hand while hailing slow but steady growth in the economy on the other is incoherent. Cognitive dissonance.
You won’t get much argument from me on the indicators that matter.
As for this:
It’s only cognitive dissonance if you believe the people doing the touting do so in good faith. I just assume at this point that they’re liars, and actually prefer this situation. It has the advantage of fitting the facts better, as actions then match motivations.
And I’ll just point out again that as of March 2014 we had 3,872,000 fewer full time jobs than we had in November 2007. That’s four years and nine months into the recovery, and that counts as a resounding success to the President and his supporters.
We have exactly one historical precedent for this severe a downturn: the Great Depression. And how did we get out of that? By stripping the sterling reserves of Great Britain in the late 30’s and early 40’s, after which we borrowed vast amounts of money to build things (planes, ships, tanks) we knew would have zero value five years later. We printed money and then burned it.
The post-war economy rested on the fact that all our economic competitors had been destroyed and were in dire need of things we had a lot of (as a result of waiting until the war was already won before we got in.) They needed food, tools, machinery. . . all the stuff we alone had.
As I said, the President and his supporters think they’re doing a great job. This is the economy they want, and this is the economy we’re going to get. Good and hard, as they say.
“Cognitive dissonance” is a simple explanation for how you can describe much of what has gone on in the last 5 plus years.
Yes, it started five years ago, jan. Which is why the President before this one ran on a policy of NOT getting involved in nation building and got involved in the two biggest such projects since the end of WWII. Which is why that same President claimed to be a conservative and expanded government at every turn. Which is why his supporters believed the first thing in both cases and endorsed the second in both cases.
And the President before that? Well, we can’t discuss him and his Presidency intelligently until we determine what the meaning of ‘is’ is.
Well, the BLS jobs number is out. I suspect if past is prologue Dave will have a post on it.
It would be unfair to call any report citing a 288K jobs increase as “poor.” However, for perspective. Its at odds with the Household Survey. (poor) Monthly and year-on-year income is flat or short of expectation. And the participation rate is at an embarrassing low level, making the standard stated unemployment rate a sham. To be fair, U6 appears to have ticked a tad lower.
Let the rationalizing begin.