Here’s What’s Going Right, and Wrong, in the U.S. Economy

New York Times: “Seven years into the economic recovery and three months before a presidential election, how is the United States economy doing?”

What’s going right?

“Overall G.D.P. was better than it looks… If we look at ‘final sales,’ G.D.P. excluding inventories, the economy grew at 2.4 percent, a nice rebound from the winter months and in line with forecasts. Final sales tends to be a better measure of the underlying rate of growth, while inventories swing around without reflecting any long-term trend.”

“Consumers are spending money. The largest component of the economy, personal consumption expenditures, grew at a whopping 4.2 percent rate in the second quarter.”

“Wages are rising more quickly… The wages and salary component of compensation is now up 2.5 percent over the last year; that same reading was only 2 percent in the second quarter… Worker pay is not just rising; it’s also starting to rise at a faster pace.”

What’s going wrong?

“Business investment is contracting… Things aren’t looking so great in the business sector. Investment in business structures, equipment and intellectual property fell for the third consecutive quarter.”

“Productivity growth is poor… This has been disappointing for several years for reasons economists don’t entirely understand. But the latest data suggest it will turn out to be even worse than that in the first half of 2016.”

 

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  • pisher

    Here’s a question–a serious one.

    What major economic power is doing better, going by these same indicators?

    We should always try to make the economy better, but no economy is ever perfect, and all economies are in a constant state of flux.

    We’re not in a depression or a recession. Unemployment is low. Wages are fairly stagnant, but that’s true in most other places. The rich get too big a piece of the pie–ditto. We have a lot of debt–so does China.

    There are many things we need to work on. I just don’t think the economy is a major issue for this election, and that may be the one thing Clinton and Trump agree on, going by their convention speeches.

    • Calbengoshi

      The OECD predicts that a number of countries will have a significantly higher GDP growth rate than the US in 2017. China, which clearly is a “major economic power,” is one of the top three in that regard, with the other two being India (#1) and Indonesia (#3). Closer to home, the OECD predicts that GDP growth in Mexico also is likely to exceed GDP growth in the US, but I wouldn’t classify Mexico as a major economic power.

      While the economy may not be a major issue for some Americans, I think it is a major issue for those who support Trump. IMO, Trump’s campaign appeals to those Americans who view themselves as being hard-working people who have been economically damaged both by government action (e.g., entering into free trade agreements) and government inaction (e.g., failure to prevent people from other countries entering into the US and becoming employed).

      • pisher

        Trump basically didn’t talk about the economy in his convention speech. He figured out he got more attention talking about race and religion. Right-wing identity politics. And truthfully, he’s just so ignorant on economic issues, the more specific he gets, the worse off he is.

        Would anyone here willingly change places with the average person in China, India, or Indonesia? I don’t mean to imply any of those countries are hellholes, or that they don’t have legitimate aspirations. But GDP is just one indicator. This article mentioned a number of them.

        People don’t care about any of these indicators at all, except to the extent that they impact their standard of living.

        • Calbengoshi

          Trump did talk about the economy in his convention speech, but not by referencing statistics about GDP or unemployment because those are not in his favor. Instead, he talked about the loss of jobs allegedly due to bad trade agreements and immigration.

          I agree that most voters don’t care about statistics other than the ones that directly affect them. However, they do know whether their own standard of living has gone up, down or stayed the same, and that is a major factor in how many of them vote.

          I didn’t say that anyone in the US would trade places with the average person in China, Indonesia or India. You asked a question, and I responded to it.

          • pisher

            But just with GDP. I was asking about the full spectrum of indicators. GDP alone can’t fully indicate the strength of an economy. As you say, Mexico might well surpass us there–and so what? We understand much of GDP is a reflection of multi-nationals redirecting industry to places with workers who are prepared to accept lower wages, fewer benefits, a lower standard of living compared to developed western nations. That’s not what most Americans consider a good economy. We want the economy to serve us. Not the other way around.

            Trump talks about the most simplistic things, because he doesn’t need to know anything to do that. We have lost some jobs due to trade deals, and gained others. To some extent, considering the economy in purely nationalistic terms may be an obsolescent conception–the people running the corporations (which on a rather pathetic scale, includes Trump) certain behave as if that were so. Nor is that a recent development. Nor does Trump intend to do anything to stop that. Nor could he if he wanted to.

            I do worry about the growth of the power of the multinationals, but the notion that we can defeat them by getting rid of trade deals, I find–pernicious. It’s as if the doctor tells you that you’ve developed heart problems, and you say “Well, take it out!” Doesn’t work.

      • RadicalCentrist

        I don’t think it’s appropriate to compare the growth of nature economies to those of emerging ones. Growth is easier when you have younger populations that are not yet fully urbanized. Consider how many refrigerators one can sell when 50% of households don’t have one or have only a very inadequate one vs how many you sell when everyone has a perfectly good one and only replaces it when it wears out.

        • pisher

          Growth has its limits. There is no such thing as unlimited growth, and overly fast growth can actually be dangerous. Stability is the goal here, not unlimited expansion–we still only have one planet, with limited resources, and we are straining them awfully hard with all this ‘growth’. To the point where we may end up destroying all our economies forever. And not just our economies.

        • Calbengoshi

          For purposes of determining whether another country is doing better from an economic perspective, GDP growth tends to be the statistic most often used, and I was responding to a specific inquiry asking what major economic power is doing better than the US.

          I only listed the top three of the countries with higher predicted GDP growth than the US. Some of the countries with more “mature economies” than India, Indonesia and China that have higher predicted growth rates than the US include Australia, Ireland, Israel, Korea, Spain and New Zealand.

          I also agree with Pisher that growth isn’t necessarily always good, and that limited resources and the impact of continued growth should be taken into account before we damage the planet to the point that there is a catastrophic reduction in human population.

          • RadicalCentrist

            Ireland and Spain are rebounding from absolutely crushing Depressions, so that is not surprising, nor much to cheer about. Nor is a snapshot at a particular point in time definitive.

            Let’s phrase it this way-of the G7 countries over the past 8 years, who has done better than the US?

          • pisher

            I think a strong case could be made for Germany. No other. Germany has been the great defender of the EU, precisely because it’s disproportionately benefited German industry, which is by far the strongest in Europe. That’s a trade deal the Germans are very happy with. TPP they don’t like at all. People predictably tend to endorse the deals that benefit them directly in the here and now, and react badly towards those that do not. The rhetoric is used to mask self-interest. On all sides of the debate.

          • RadicalCentrist

            I don’t know that TPP would affect trade within Europe much, if at all.

            If you look at the following graph, for 2007-2014, only Canada outperformed the US and that only marginally. If you add more recent numbers, with the fall in oil prices, Canada would probably be no better than the US or maybe even a bit lower.

          • pisher

            I don’t know either, but I do know my friend in Germany, who works for an auto manufacturer, is rabidly opposed to it, and we can’t really have a calm conversation about it these days. He’s become very influenced by Piketty and others. This was never a radical guy we’re talking about. Good head on his shoulders.

            People get scared about their livelihoods, you never know which way they’re going to turn.

            His belief, right or wrong, is that TPP will lead to German jobs being taken out of Germany. Whether it hurts the European economy overall isn’t relevant to him–what’s relevant is whether he and his co-workers would keep their jobs. A man’s job becomes his identity–if it’s taken away from him, who is he? What wouldn’t he do to get that piece of himself back? Read Donald Westlake’s The Ax sometime.

          • RadicalCentrist

            I read Piketty and didn’t see anything much about the TPP or trade in general.

            And TPP is agreement involving the US, Canada and several Asian countries. I don’t see how it affects Germany. The German cars sold in the US are already assembled here in many cases, just like the Japanese and Korean cars.

          • Calbengoshi

            If we limit it to the G7 countries, then none of them have done better than the US over the past 8 years, although Canada comes close.

            However, the question to which I originally responded asked about the status of major economic powers, and even though China isn’t part of the G7 it clearly is a major economic power and its GDP growth during the past 8 years has far surpassed that of the US.

          • RadicalCentrist

            Yes, but I don’t know a single economist who believes that it’s possible for a mature economy like the US to grow at the rates claimed for China. And some dispute the numbers China reports, since they are not very transparent.

            To me the G7 are the relevant comparison and the US is doing pretty well.

      • RadicalCentrist

        I don’t think it’s appropriate to compare the growth of nature economies to those of emerging ones. Growth is easier when you have younger populations that are not yet fully urbanized. Consider how many refrigerators one can sell when 50% of households don’t have one or have only a very inadequate one vs how many you sell when everyone has a perfectly good one and only replaces it when it wears out.

  • CJR

    Productivity measured how?
    If it’s measured by worker-hour, then it’s probably going up.
    If it’s measured by productivity per dollar paid, then it’s expected. Worker wages have been stagnant for so long that wages HAVE to go up.

    • pisher

      Oh never say that–they don’t have to. There’s plenty of people around the world who can attest to that. There are forces that push them up, agreed. And others that pull them back down again. It’s up to us to make the upwards forces stronger.

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