(Analysis) This (final) quarter of 2013 and the first quarter of 2014 will probably bring reports of many “real” measures of economic performance back to par with levels achieved before the recession of 2008-9 (see graph at top left). This should be cause for some celebration, coming after about 6 years of continuously depressed measurements of US economic activity.
It is doubtful, though, that either policymakers or pundits will crow over this milestone. It is simply too long in coming. Whereas prior to the 1980s, recovery from recessions was relatively fast and steep – you could count on a quick turnaround – the time it takes to recover from recessions since has been growing longer. The recoveries from the last two recessions are particularly long and drawn out, leading some to wonder aloud whether or not we are entering a new period of relative economic stagnation .
Some will point to an aging, slower-growing population in order to explain any apparent economic stagnation. While this undoubtedly will play some role in lowering the potential for economic growth, it is incumbent upon policymakers and those who provide them with advice to begin looking seriously for causes as to why many measures of our economy suggest worsening performance since the early 1980s. Vastly widening income inequality is perhaps a particular measure that our policymakers should pay some attention to (see previous content here showing a large disparity in types of income that appears suddenly about 1980 in Buffalo, NY).
It should be noted with some satisfaction that the US economy is reaching levels achieved before the last recession. This indicates a degree of economic recovery. At the same time, understanding is needed as to why the economy can no longer deliver easily a good lifestyle that most believed to be a birthright here in the US before the 1980s. Until a reasonable understanding is reached, expect simply more of the same: economic performance that begins to approach stagnation.