Economy Not Growing Fast Enough to Support Jobs Growth
Joe El Rady
Consensus forecasts from economists, left to right, bearish to bullish, project 2011 GDP growth to be between 2.0 and 2.8 percent. Consensus forecasts also predict the long term US economic growth rate to be 2.5%, even given the 2012 growth estimate of 3.5 percent. Forget sprinting, the economy isn't even walking; it's crawling!
As for jobs, we cannot escape Okun's Law: each year, for every two percentage points that the economy grows above its annual long-term trend, unemployment falls by a percentage point. Guess what, that means that the economy is not, and will not in the near future, grow quickly enough to create jobs and lower the unemployment level. This is why consensus forecasts also predict that unemployment will remain high, ending 2012 at approximately 8.5%.
I've stated for some time now that we all need to get used to the fact that the US is a post-industrial economy. That means we need to expect, make peace with and live with lower levels of economic growth, higher levels of unemployment and higher taxes. Wake up! Deal with it! We are post-industrial! We need to accept that, the way the Europeans have... and that's what our economy will resemble: Europe's. The sooner we deal with that reality, rather than attempting to deny it, the sooner we will figure out how to proceed with a healthier economy. The longer we listen to our vote pandering politicians who want to make us feel better by denying this state of affairs, the longer we will languish. After all, you can't find a solution until you have accepted the problem.
Joe El Rady
Consensus forecasts from economists, left to right, bearish to bullish, project 2011 GDP growth to be between 2.0 and 2.8 percent. Consensus forecasts also predict the long term US economic growth rate to be 2.5%, even given the 2012 growth estimate of 3.5 percent. Forget sprinting, the economy isn't even walking; it's crawling!
As for jobs, we cannot escape Okun's Law: each year, for every two percentage points that the economy grows above its annual long-term trend, unemployment falls by a percentage point. Guess what, that means that the economy is not, and will not in the near future, grow quickly enough to create jobs and lower the unemployment level. This is why consensus forecasts also predict that unemployment will remain high, ending 2012 at approximately 8.5%.
I've stated for some time now that we all need to get used to the fact that the US is a post-industrial economy. That means we need to expect, make peace with and live with lower levels of economic growth, higher levels of unemployment and higher taxes. Wake up! Deal with it! We are post-industrial! We need to accept that, the way the Europeans have... and that's what our economy will resemble: Europe's. The sooner we deal with that reality, rather than attempting to deny it, the sooner we will figure out how to proceed with a healthier economy. The longer we listen to our vote pandering politicians who want to make us feel better by denying this state of affairs, the longer we will languish. After all, you can't find a solution until you have accepted the problem.
posted by Joe El Rady at
4:48 PM
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