Let us not kid ourselves. If our economy was a patient the doctors would be worried.
Here are a few notes the docs would make: The economy is growing at half the pace most economists predicted. It is growing slower than it did last year.
The job numbers are awful. Real unemployment is probably about 15%. That is a nasty condition. We need to create 150,000 jobs a month just to keep up with new workers who join the job market. Last three months we’ve averaged maybe 75,000.
Meanwhile, our education systems fail us. There are only 3 developed nations where people in their 20’s have poorer educations than their parents. Ours is one of those three. Not good.
Many Americans attack and envy the so-called top 1% of earners. Well, they should be happy. Top earners’ income fell 37% during the recession. Their drop in income was 18 times greater than the fall in income of other groups. Economists know that top earners create lots of jobs for others. They are not pleased to see top earners lose ground.
Meanwhile, consumers are losing confidence. And they have less disposable income than they had last year. They cannot spend what they don’t have. And when their confidence dips they spend less of what they do have.
The Eurozone is in recession. They are major customers. China’s economy is slowing. So are some of the emerging market economies. All major customers of our companies.
Many of our big companies are already slowing. Their profit growth rates are weakening. So they are cutting their capital spending by two-thirds. Capital spending creates jobs. What do you suppose happens when that spending declines?
At the end of the year we face a cliff. A bunch of taxes will go up. A bunch of spending cuts will begin. Virtually every economist says these will cripple us. A weak economy like ours cannot take these jolts. So the politicians will have to do something to soften them. What will they do? Nobody knows. Uncertainty reigns.