Cold Winter or Stalled Recovery?
During 2013, the US economy experienced a reasonable level of growth. The 3.4 percent growth rate in the second half of 2013 represented a solid growth rate, not enough to trickle down to those who live at the periphery of the economy. Those with low or stagnant wages might find that their lives have not improved by 3.4 percent. Indeed, the gains from gross domestic product growth may mostly be captured by the wealthy.
The first quarter of 2014 was an amazing disappointment. Instead of the modest growth of 3.4 percent from the second half of 2013, the economy grew by just one tenth of one percent. This is the one of the slowest growth rate in the five years of so-called economic recovery. Based on these data, the economy grew more than 300 times more slowly than it did in the last half of 2013. Some say we are growing at a snail's pace, but even the most sluggish snail can do better than this!
Can we blame this stagnant economy on the harsh winter we have experienced? Between snow, hail, sleet and rain, housing starts have slowed. People who might hit the malls are staying home. People aren't buying cars at expected rates. Since consumer spending drives about three-quarters of our nation's economic growth, postponed spending dampens growth. But consumer spending has not slowed as much as GDP has. Spending on health care (thanks to Obamacare) and on other services suggests that consumers have had mixed engagement as spenders.
On the other hand, wag, businesses aren't spending as much as they might, and their holding off on spending both makes it difficult for them to add employees to their payrolls. It also impacts GDP. What are these businesses waiting for to persuade them to invest in the economies that went into debt for their survival? Banks aren't lending as much as they might, and even consumer credit is tighter than it should be. Consumers are spending despite, not because of, sluggish economic growth.
Growth might be stronger if the job market were more robust. I'm writing before first Friday unemployment rates are released, but these rates, on the high side of six percent, are not likely to go below that level. Wages are stagnant. Every measure that President Obama has introduced for job creation our Congress has rebuffed unemployment assistance. While economic growth is, at best, sluggish, there are many who have not experienced any recovery at all.
While macroeconomic indicators deal with overall issues of economic growth, few indicators are disaggregated by race or income status. The Obama initiatives to raise wages, lower unemployment and create jobs are important because they are modest ways to spread the wealth and to ensure that economic growth is more evenly distributed. After all, we know that those at the top garnered the most gains from money thrown at them because they were "too big to fail". Are those at the periphery just too small to survive?
We can't have sustained economic growth when those who depend on banks to provide funds for economic expansion are shut down. We won't have sustained economic growth if (0fficiallly) one in 15 people, and one in eight African Americans cannot find work. Economic recovery is meaningless to someone who lost a home during the great recession, and is clawing back to survival. While those with mortgage challenges were promised relief, few of them are have received it.
Some expect the economy to come roaring back in the second quarter, but I don't expect the growth rate will be much higher than three percent. Further the growth rate does nothing to close the wage and income gap that clearly slows economic growth. Who gains and who loses based on the growth rate? This is as an important an issue as is the issue of sluggish economic growth.