“The new normal,” is one of these.
When real GDP growth for 2014 was announced last month, it came in at 2.4 percent. Politicians crowed about how the economy grew throughout the year, pointing to the GDP numbers as well as falling unemployment figures.
However, since 1950, our economy has averaged a real GDP growth rate of 3.2 percent. Without any historical perspective all the happy talk about the 2.4 figure would make a casual observer think that we did quite well in 2014. Keep this up for a while and our leadership will have established a “new normal.”
And hey, if it manages to tick up to 2.8 percent, many of our citizens will think we’re experiencing an economic boom.
Grading the economy
However, if you do the simple math of comparing our Post WWII historic average of 3.2 percent to last year’s 2.4 percent, you’ll see that it’s fully 25 percent below average. If we were school teachers and we gave an “A” to a growth rate of 3.2 percent, we’d have to give last year’s 2.4 percent at best a “C” grade.
And frankly, my little comparison is being very kind; last year’s growth didn’t get close to our nation’s long-term average growth rate. If your child scored 25 percent lower than his school’s solid “C” students, there would be some uneasy moments at home on report card day.
Consumer spending was a bright spot and really helped out in the fourth quarter. This is good for many small business owners. The oil shale boom fueled the economy as well. In 2014, North Dakota and Texas ranked one and two in their job growth rate at 5.4 and 4 percent respectively.
Further over the last decade, we owe a lot to the Lone Star State. According to a report published by the Federal Reserve Bank of Dallas, between 2000 and 2013, Texas employment grew by nearly 25 percent while the rest of the US expanded by less than 5 percent.
Warning: With oil and gas prices falling so dramatically, this boom may be over for a while. Also, a strengthening dollar will hurt exports, which were already lackluster.
Get a job
Jim Clifton, chairman and CEO at Gallup, put the unemployment picture in its proper perspective recently. He noted how the media, White House and Wall Street were celebrating a 5.6 percent unemployment rate. He then went on to list all the categories of workers that are excluded when the U.S. Department of Labor starts counting up unemployed folks:
- Anyone who has stopped looking for a job over the last four weeks,
- Anyone who works a minimum of one hour and pockets $20 in a week, and
- Part time workers who need and want fulltime employment.
As bad as that is, Clifton cited a figure that is even more tragic. Right now our economy only has full-time jobs available for 44 percent of the adult population. That figure needs to be at least 50 percent, which would require the creation of 10 million new jobs.
If there are not substantial improvements in our economy over the next few years, we will certainly be stuck with a “new normal” that is unable to grow or even sustain the middle class and that spells real trouble for our political and social stability.