Inside the 'Growthless, Jobless Recovery'

Inside the 'Growthless, Jobless Recovery'

[Editor's note: This is the first in a three-part series on The Next Economy. Parts two and three will be published in the coming week.]

It can bore the smile off a 10-year-old, make a teenager think watching 60 Minutes is fun, and stop a bounding golden lab in his tracks. It makes retired people nervous, working people frustrated, and unemployed people both. It is the U.S. economy. And the last time it grew this slowly, gas was 18 cents per gallon and stamps were 3 cents a pop.

Last year around this time I wrote an article titled "Go Slow Stay Low" that stated we were in the midst of a jobless and growthless recovery, for three reasons: Practically, because we had been overly reliant on consumer spending and would now save more; behaviorally, because we would shift values and experience the dawn of a new political era; and theoretically, because we cannot grow forever.

How did those predictions fare in 2010? Some well, some not so well. America's growth has indeed hit a wall. Our real GDP grew at a rate of 1.9 percent a year during the 2000s, less than half the 3.9 percent a year the U.S. grew for the previous six decades. Current estimates for GDP growth for 2010 remain just 2 percent.

We have also started to save more. Personal savings rate (the amount saved as a percent of disposable income" target=new> averaged over 5.5 percent for the first three quarters of 2010, much greater than the 2 percent it was from 2005-2007, before the recession, but not as high as the 7 percent it briefly reached for one quarter during the spring of 2009.

However, we are not spending less. As my colleague Tom Coleman points out, the increase in savings outlined above is due to being taxed less, not spending less. Spending as a percent of personal income has remained almost unchanged.

We are starting to see a values shift. Home sizes remain smaller and luxury goods sales are off. Macy's retail sales grew by half the rate of Goodwill Stores, which jumped 10 percent [PDF] in the first half of this year compared to the first half of 2009.

As for the dawn of a new political era? Well, I was wrong there. We had the dawn, but we may have seen the sunset too. Rest assured that both Obama and a Republican House will be scrambling to get that GDP growth rate back up in 2011, and to take credit for it. Will they be able to do it? Not in time for the next election, I am afraid. In the next article I will outline metrics to watch and predictions for 2011 that will impact sustainability's trajectory.

The opinions in this series are the author's, and not of his employer, GreenOrder.

Photo CC-licensed by Ivan Mlinaric.

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