Well, we have concluded our series examining the US economy by assessing the 26 key variables. The data clearly shows that no area of the economy has been performing very well. We saw four areas were tracking about average, 14 were doing poorly, and eight were close to the worst in the world today.
We shall wrap this up with two dismal observations: why many Americans believe the opposite of the truth about the economy. And why this really doesn’t matter much any more.
Economists and others who follow the progress of the economy – or regress, over the last three years – must have shouted at the television several times during the Democratic Party presidential candidates’ debates. Frequently, senior Democrats openly stated “I accept that the economy is doing extremely well”, or words to that effect. It just isn’t.
Media commentators also make similar bizarre remarks, such as Washington Post columnist Steven Pearlstein who recently penned this:
“Even as a bitter and partisan impeachment trial plays out in Washington, the signals emanating from the economy continue to be amazingly positive. The unemployment rate is at record lows, the stock market is near record highs, corporate profits remain strong, and growth, at around 2 percent, is the highest among advanced economies.”
Wrong, wrong, wrong, wrong and wrong! The signals are overwhelmingly negative, as the actual data explored in this series has proven.
Unemployment is nowhere near the US record low. It was down to 2.5 per cent in the post war recovery. Before the coronavirus hit, the USA was tracking outside the world’s top fifty countries on jobless rates. It now ranks 66th. That’s not bad, but not “amazingly positive”.
The stock market is not a measure of a sound economy. In any event, it has been whipsawing like ... like something that whipsaws a lot, but not in a good way. Over the last 12 months, the Dow Jones has lost more than a thousand points on at least five separate occasions. See graph at the top here. That was before any suggestion of a pandemic.
Yes, corporate profits are strong. But that is only of benefit to the economy – and to the nation’s citizenry – if a fair share remains in the country, and if a fair share is ploughed back into productive investment, and if a fair share is allocated via corporate taxes to building the infrastructure which enables corporations to thrive. The evidence over the last two and a half years is that these outcomes have not been achieved.
“Growth, at around 2 percent, is” absolutely NOT “the highest among advanced economies.”
As we saw here in episode three, annual growth in gross domestic product (GDP) has slumped badly over the last three years, relative to other advanced economies.
Annual growth for the 2019 fourth quarter was a lowly 2.33%. This ranked 102nd globally, close to the lowest ever. Among the 36 OECD countries, this ranked a modest tenth, well behind the leaders. Estonia, Israel, Lithuania, Poland and Luxembourg were above three per cent. Hungary and Iceland grew more than four per cent. Turkey and Ireland were above six per cent.
A strange hypnosis appears to have affected much of the USA as Trump and his lackeys have relentlessly tweeted that the US economy is the “best in the world by far” and “best ever”. The opposite is true. It is close to the worst-performed ever, relative to comparable economies. Explaining the psychology at work here is for others with expertise in this area.
As the impact of the coronavirus on the economy unfolds, it seems unlikely anyone will need to track the specific variables closely. It is almost certain they will all deteriorate even further below the low points reached already. But because blame can henceforward be sheeted directly to the pandemic, it is unlikely Trump’s supporters will be obliged to face the reality of his economic failures. We shall see.
As always, comments, questions and suggestions are warmly invited. A bientôt.