Dean Baker: Why Growth Still Feels Like Recession

[marmar]

via CommonDreams:



Published on Friday, October 29, 2010 by The Guardian/UK

Why Growth Still Feels Like Recession
Think the US economy's 2% growth is a good news story? Think again: it has to be 2.5% just to stop joblessness rising

by Dean Baker


Last month, the National Bureau of Economic Research's official business cycle-dating committee told the country that the recession had ended in the second quarter of 2009. This was, undoubtedly, the correct call. The economy is showing positive growth, which is what defines the end of a recession.

However, the growth is so weak coming out of this downturn that it will be invisible to anyone who doesn't spend their life looking at economic data. For most people, this will be a recovery marked by continued high unemployment and near-record rates of home foreclosures. And the politicians' response is to cut people's social security benefits.

It may not be immediately obvious quite how weakly the economy is growing. First, we need a reference point. When an economy gets out of a step recession, it should be soaring, not just scraping into positive territory. In the first four quarters following the end of the 1974-75 recession, growth averaged 6.1%. In the four quarters following the end of the 1981-92 recession, growth averaged 7.8%. The growth rate averaged just 3.0% in the four quarters following the end of this recession.

But the actual picture is even worse. Most of this growth was driven by the inventory cycle as firms went from running down their inventories to rebuilding them. If inventory fluctuations are pulled out, growth in demand averaged just 1.1% over the four quarters following the end of the recession. Final demand growth was down to just 0.6% in the most recent quarter. ........(more)

The complete piece is at: http://www.commondreams.org/view/2010/10/29-4

[provis99]

1. I wish Dean Baker was the Treasury Secretary. n\t