Will Any Economic Growth That May Happen in 2011 Be Felt on Main Street?
The consensus opinion by just about everyone is that the economy is poised to experience measurable growth in 2011 for the first time in several years. It's not out of the question. With as far as we fell in 2008, the business cycle is overdue for a growth spurt. I'm skeptical that even that will happen though. Early in 2008, only 2% of economists surveyed projected we'd be in a recession by the end of the year. The expert opinions seldom prove beyond reproach, or in some cases even in the same light year as reality. There are plenty of anchors out there that could easily produce a double-dip recession.
First and foremost, the problem of toxic mortgages is far from solved. The debt associated with those foreclosed homes is not accounted for, and the numbers of foreclosures is still rising as the bad loans are still catching up to millions more underwater homeowners. Until the job market produces jobs capable of paying these underwater homeowners' mortgages, expect the debt to continue cycling through the economy. Even if the worst is behind us, we're nowhere close to being out of the woods.
Secondly, energy prices. As predictable as the sun rising in the east, the first signs of life in the American economy and the global economy is causing a surge in oil prices. It's not as if nobody could see this coming, but here we are nonetheless, poised to suffer through prices at the pump of at least $4 a gallon, and possibly as high as $5. Aside from raising the cost of doing business, it was also crimp already fragile consumer demand. There are no easy answers on reducing energy costs, but the political right has the most sellable talking points on the issue and will win the argument with more drilling, even after the Gulf Coast disaster.
Also, where are the jobs? It's hard to imagine a scenario where enough jobs are gonna be created to even measurably reduce the unemployment rate let alone create any upward momentum for wages. As jobless benefits get cut off for millions of Americans who will most likely never work again in our postglobalization economy, there's no telling what impact it will have in terms of rising crime and children unable to afford the pursuit of higher education because of their parents' long-term unemployment.
And along those lines, the continued budget shortfalls in the state will force austerity upon the economy and likely produce a combination of soaring tuitions and a loss of even more middle-class state jobs that currently offer almost single-handedly the purchasing power propping up consumer demand. So even if the jobs numbers appear good at various points in 2011, be sure that the jobs replacing those of well-paid government employees will be part-time temp jobs. In November 2010, 85% of the new jobs created were part-time temporary.
Add all this together and its hard to see how any economic surge in 2011 will be felt on Main Street. Expect the year to end with an unemployment rate of no lower than 9.2%, gas prices at near $4 a gallon (gas prices will likely peak in the summer as they usually do), and people who've run out of unemployment benefits moving back in with family or sleeping under bridges (the latter of which is the great underreported story of this recession....the hyperexpansion of the homeless). And none of this even accounts for the fallout if the deranged Tea Partiers who just took over the House make good on their promise not to raise the debt limit.
Perhaps we'll weather the storm with a better economy in 2011 than what I see as possible, but I think a little healthy cynicism is more than warranted here. And even in the best-case scenario of robust economic growth every month of 2011, the working class and what's left of the middle class will still end the year worse off than they started it. That's just the way the restructured post-NAFTA economy will roll for the foreseeable future.
First and foremost, the problem of toxic mortgages is far from solved. The debt associated with those foreclosed homes is not accounted for, and the numbers of foreclosures is still rising as the bad loans are still catching up to millions more underwater homeowners. Until the job market produces jobs capable of paying these underwater homeowners' mortgages, expect the debt to continue cycling through the economy. Even if the worst is behind us, we're nowhere close to being out of the woods.
Secondly, energy prices. As predictable as the sun rising in the east, the first signs of life in the American economy and the global economy is causing a surge in oil prices. It's not as if nobody could see this coming, but here we are nonetheless, poised to suffer through prices at the pump of at least $4 a gallon, and possibly as high as $5. Aside from raising the cost of doing business, it was also crimp already fragile consumer demand. There are no easy answers on reducing energy costs, but the political right has the most sellable talking points on the issue and will win the argument with more drilling, even after the Gulf Coast disaster.
Also, where are the jobs? It's hard to imagine a scenario where enough jobs are gonna be created to even measurably reduce the unemployment rate let alone create any upward momentum for wages. As jobless benefits get cut off for millions of Americans who will most likely never work again in our postglobalization economy, there's no telling what impact it will have in terms of rising crime and children unable to afford the pursuit of higher education because of their parents' long-term unemployment.
And along those lines, the continued budget shortfalls in the state will force austerity upon the economy and likely produce a combination of soaring tuitions and a loss of even more middle-class state jobs that currently offer almost single-handedly the purchasing power propping up consumer demand. So even if the jobs numbers appear good at various points in 2011, be sure that the jobs replacing those of well-paid government employees will be part-time temp jobs. In November 2010, 85% of the new jobs created were part-time temporary.
Add all this together and its hard to see how any economic surge in 2011 will be felt on Main Street. Expect the year to end with an unemployment rate of no lower than 9.2%, gas prices at near $4 a gallon (gas prices will likely peak in the summer as they usually do), and people who've run out of unemployment benefits moving back in with family or sleeping under bridges (the latter of which is the great underreported story of this recession....the hyperexpansion of the homeless). And none of this even accounts for the fallout if the deranged Tea Partiers who just took over the House make good on their promise not to raise the debt limit.
Perhaps we'll weather the storm with a better economy in 2011 than what I see as possible, but I think a little healthy cynicism is more than warranted here. And even in the best-case scenario of robust economic growth every month of 2011, the working class and what's left of the middle class will still end the year worse off than they started it. That's just the way the restructured post-NAFTA economy will roll for the foreseeable future.
posted by Mark at 1:34 PM
1 Comments:
I would like the see the figure where only 2% of economists said that there would be a recession in 2008. It was pretty clear by spring of 2008 that a recession was probably here as seen by the fact that unemployment rose from 4.4% in early 2007 to 5.5% by June 2008. If that didnt scream out recession to most economists, I dont know what will.
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