- Last Updated on Tuesday, 28 August 2012 22:09
- Published on Tuesday, 28 August 2012 22:09
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It’s an open question. Namely, is the great recession really over? Economists will tell you, yes it is. The economy has been growing, albeit minimally for several years now. They call that a recovery. Unfortunately, the reality is that it sure doesn’t feel like one. Whether you’re in the Northern Neck, Southern California, or Texas, businesses are still closing, and jobs remain scarce.
The number most economists cite in discussing the health of the economy is the Gross Domestic Product (GDP). That’s the sum total of everything we buy, sell, and save in the United States. And yes, it’s been growing at a rate of about 2%. But, while technically a recovery, because it’s increasing, it’s still the weakest rebound in 60 years. For there to be any real improvement in our economic conditions, in terms of business activity and jobs, the rate of GDP growth would have to at least double.
Another indicator, the kind we know all too well, is jobs. Unemployment is still stuck at over 8%. It just won’t budge. The reason is that some businesses are still cutting back, while others, perhaps seeing possible improvement, are nonetheless unwilling, without evidence of a larger overall recovery, to hire new people.
Unemployment, while 8.4% nationally, and that’s bad enough, is worse than that in some regions. In California the rate is 10.9% and in Michigan its 9.6%. And this statistic doesn’t capture those people who have given up looking for work, or have taken to working at occasional jobs. If that information were added, the numbers would be substantially higher.
In Virginia, as usual, the situation is much better. Unemployment in the Commonwealth fell from 6.8 at this time last year to 6.0%. In King George the unemployment rate is 6.8%. That’s higher than the statewide rate, but better than the 7.4% the county was facing last year. However, even in Virginia, there are pockets of high unemployment. Particularly hard hit areas of the state include Brunswick County, a primarily rural county on the North Carolina border where unemployment is over 10% and in Danville, a town that has long since lost its principal industry, textile manufacturing, it’s 11%. In Dickinson, Buchanan and Wise Counties, where coal mining is a major employer, unemployment is also way above the state average.
However, it would be a mistake to say that the economy isn’t generating new jobs. It does every month. In June, the U.S. economy created 125,000 jobs. However, even that large sounding number couldn’t keep up with new entrants to the workforce, let alone, reduce the number of people out there who want to work.
It’s fair to say that no one, not Mitt Romney, and alas, not President Obama, have any real idea of how to get things moving again. Romney focuses on deregulation and lower taxes. Many think he is on to something. While Obama, though not proposing anything as massive as his stimulus bill of 2009 (which he argues kept things from collapsing altogether), still suggests more federal money. However, while the candidates campaign, back in Washington, now quiet for the August recess, the budget impasse, and what’s called the fiscal cliff, has put a chill in the plans of many businesses and investors – further hurting any prospect of a recovery.
What they’re afraid of is that the sequestration will kick in, with large scale and immediate cuts, particularly to large-scale defense programs, and at the same time, the Bush tax cuts, will lapse, significantly increasing tax rates. Not everyone thinks this is a bad idea. But, as is usually the case in business planning, it’s the profound uncertainty that is making them cautious. They just don’t know how to plan and until Congress resolves the matter, which could take a long time, this is going to be another limiting factor on any possible economic resurgence.
Another side of this recession has been its impact on income and net wealth. Income levels, for workers, whether day laborers, people just getting by, or people making more, and considered middle class, adjusted for inflation, has actually gone down. The recession made the situation worse, but it was a trend that was already underway. And finally, the one reserve many of us counted on, the value of our homes, went down substantially during the real estate crisis and has yet to recover.
In closing this column, I want to find a positive note, and unfortunately, it’s hard to do. But not impossible. The U.S. economy, more than any other in the history of the world, has shown a unique ability to adjust, to adapt, and create new opportunities where none thought possible. And perhaps, that’s something the candidates in 2012 need to remember too. Namely, give U.S. business, and its entrepreneurs, the chance to do what they do best. If this means rethinking regulations, creating enterprise banks, or cutting certain taxes, maybe that’s what we should thinking about. Anything that would revive some of the spirit that makes our economy go.
You may reach David Kerr at www.journalpress.com