Are there problems in the US economy?
Source: St. Louis Fed
Sure there are. Exhibit one is the rate of economic growth. Any way you measure it, real economic growth has slowed significantly over the past 30 years. The economy is a lot less volatile than it was in the ‘60s, and ‘70s, but the rate of economic expansion has gradually gotten slow and slower. The economy used to grow faster; now it’s growing more slowly. Whether we’re exporting jobs in order to buy more stuff or socializing more with our smart phones and innovating less – whatever the reason – the average growth has rate declined from 4.5% in the ‘60s to 2% in the current decade.
And this is happening despite the fact that we are now in the third longest economic expansion since we’ve been keeping detailed economic records. Central bankers are congratulating themselves about their signal achievements – low unemployment, low inflation, and a prolonged expansion – amid hanging glaciers and gorgeous mountain scenery.
Photo: Jon Sullivan. Public Domain. Source: PD Photo
But slower growth has had a significant cost. Ben Bernanke blames slow growth for the rise of economic populism in the US, UK, and Europe. Since 2000, the growth of drug, alcohol, and suicide deaths among non-minority Americans has soared across the country. In contrast to the rest of the world, the total mortality rate for white 45-54 year olds in the US has risen over the last 30 year – outstripping advances in health care. Some are calling this, “death by despair.”
Souce: The Atlantic
The lack of economic growth leads to a lack of jobs. While unemployment may be low now, participation in the job market is low, too. And even if you have a job, real wages have been stagnant for the past decade as productivity growth has slowed.
Our social safety net may provide financial support, but it doesn’t provide meaning, or hope. A healthy economy won’t solve all our social problems, but it doesn’t hurt. Somewhere in the position papers presented at Jackson Hole this week, there ought to be a way back to growth.
Douglas R. Tengdin, CFA