The solid center of the U.S. economy, the middle class, is struggling. Good, mid-income jobs have not kept up with population growth. An acceleration of growth continues to be expected by experts but is not yet being felt.
If the great recession belongs to George Bush, then the Sluggish Surprise is certainly President Obama’s.
Although we consistently support fiscal policies more conservative than Obama’s, we believe it unfair to blame the president for every headwind slowing the country down. It is ridiculous, as some partisan commentators imply, that the president is intentionally trying to destroy the economy.
The problem is deeper than a need for slightly lower taxes and slightly less regulation, or a little more help here and there from Uncle Sam.
Corporate profits have generally been good, and that is reflected in high stock prices. Yet it is surprising that many large, successful companies continue to announce layoffs and are not raising pay for workers or reinvesting in their businesses.
Productivity has not grown fast enough to support a robust recovery, but it is surprising that productivity actually fell in the first three months of this year.
Meanwhile, GDP also stalled in the first quarter, an unanticipated dip widely attributed to the rough winter. But the economy shouldn’t be so fragile that seasonal snow sends it sliding backward.
Evidence of the Sluggish Surprise is everywhere. Bloomberg Businessweek reports that last year 650,000 men quit playing golf in this country. There are no doubt many reasons why fewer rounds of golf were played in 2013 than in the past 20 years, but we suspect some golfers switched to less costly pastimes.
The total percentage of people not working is higher than it has been in 36 years. It’s no surprise that the Baby Boomers are beginning to retire, but that’s only part of the problem.
Many of the non-workers are young adults who should be on their way up the career ladder. Instead, they are living with mom and dad.
The number of 20-somethings out of the labor force and living with their parents, reports Mark Zandi in Moody’s Analytics, has grown by 1.5 million since the recession.
They also hold some $1.1 trillion in student loan debt. President Obama wants to ease the repayment schedules of those with low-paying jobs, but it’s a small idea that won’t counter the trend of young adults postponing marriage and home ownership.
Housing also has other challenges. CNBC reports that nearly 10 million people still owe more on their mortgages than their homes are worth. The number of borrowers with less than 20 percent equity in their homes is nearly 37 percent nationwide. The lower the value of the house, the more likely the owner is to owe more than the market value.
Gasoline has cost more than $3 a gallon for well over three years, the longest period it has been so high. The surprise here is that it has been energy keeping the economy going. Had new ways not been found to squeeze out more domestic gas and oil, the great recession would be even greater.
Unconventional energy extraction is now 2.5 percent of an economy that has averaged only 2.2 percent growth since the recession ended. The Cato Institute notes that “without fracking of oil and gas deposits, there would have been no economic growth in the U.S. over the past five years.”
That’s a sobering reality for an economy that has been receiving a long and extraordinarily powerful push from the Federal Reserve’s monetary policy.
We fear that growth predictions will continue to be overly optimistic until Middle America rebounds strongly.
You will know that is happening when more of those born in the 1980s, when Ronald Reagan was president, begin planning for a financially brighter future.