Slow Economic Growth Doesn’t Surprise Me, Nor Does It Concern Me

The economy has been recovering from the lows in 2008 and 2009.  Few would argue this.

Unemployment rates were well over 10% at the time.

Housing prices were continuing to fall.  Mortgage foreclosures were on the rise and getting worse by the month.  Salaries were flat or falling.

For awhile, the stock market was in a free fall.

It’s gotten better.  Unemployment is around 8%, a modest improvement.

Housing prices in most metropolitan areas have started to rise, or at the very worse, have flattened.  Companies, for the first time in a few years, reported that they were planning on increases wages.

Some people don’t think this enough.

Recovery is typically defined when we get back to 6-7% unemployment, and the growth in spending is at a faster rate than what we’re currently seeing.  I’ve seen some articles written where the slow path to recovery seems to indicate that we aren’t really even recovering, and that we could slip back into a recession at any point.  I think this fear has a lot to do with the skittishness on Wall Street.

Quite honestly, I don’t believe any of this is really true.

When you look at the fundamentals of what led to the Great Recession, I truly believe it was in the works for 20 years.  Maybe I’m jaded because that’s right around the age that I was old enough to understand and start paying attention to the economy and global events, and there’s one that sticks out in my mind:

NAFTA.

That’s right, the good old North American Free Trade Agreement.  Essentially opening up our borders to Canada, and more importantly, Mexico.

I remember when I first heard about NAFTA and what it was going to do I thought to myself “That sounds like jobs might go away.  I wonder how that’s going to work.”

Well, they told us that it would work by not just taking jobs away, but re-creating them in other areas as the global economy expanded.

Uh-huh, sure, I thought.  It didn’t make a lot of sense to me, and I don’t think what they promised would happen actually happened.

Except for the jobs leaving part.  That did happen.

Unfortunately, it didn’t mean that we formed a bunch of new jobs.  It didn’t mean that the economies of other countries that got those jobs created net new jobs elsewhere, or if it did, that they necessarily were created here.

Long and short, we lost a lot of manufacturing jobs and that…

Wait, let me stop because there’s more to it than just that.  After NAFTA, many plants and various other manufacturing activities shut down.  That affected the people that worked there, but it also affected a lot of other businesses.  The ripple effect of a plant closing means that anybody else working to support that plant also lost their job, and so on down the line.  A plant could have had 500 workers, but in the end, 1,000 people (or more) could have been without a job when those jobs got ‘outsourced’.   So this job loss was not such a small thing, and even if we became more technically savvy, there just wasn’t enough jobs (or skill for those displaced workers) to get those 1,000 jobs back.

But back to my point,

We lost a lot of manufacturing jobs and they weren’t coming back.  We also got a lot better at things that we were doing, so the manufacturing jobs we kept, as well as jobs in all sorts of industries, became less plentiful because we could use technology to find ways of doing more with less people.

Usually a great thing, but not if you’re the people that were no longer needed.

In the end, all of this technology and all this improvement led to a gradual erosion of our job market and our economy.

However, we were able to hide it for about 15 years or so.

We hid it by slowly increasing government spending.  They put some of those people back to work.

We hid it by a tech bubble in the late 1990’s, where wealth was created overnight.

When that didn’t stick, we moved on to real estate.  Values skyrocketed and people pulled cash out of thin air.

All of this worked to hide the fact that we had a lot more people around that didn’t have as much to do.

Eventually, the bottom fell out, and for the first time in almost two decades, we’re having to deal with the repercussions of all this.

We can’t have the government hire our way out.

We can’t use the stock market or the real estate market as our way out.

We aren’t going to suddenly re-discover our way back to the top of manufacturing.

In other words, this recovery is going to have to be based on something real.

And after essentially twenty years of hiding the fact that the economy has been slowing, it’s going to take time.

A lot of time.

Anybody hoping for a quick fix is hoping that we create a new bubble, because from the way I see it, a real recovery is going to take a long time.

I don’t think we have to consider a slow recovery any sort of lost period.  Some will say that if it takes ten years to recover, that would be a lost decade.

I respectfully disagree.

I would call that a rediscovery decade.

Because what that would mean, if we did it correctly, is that we re-built a true economic foundation.  The foundations which we’ve been trying to build on for most of my adult life have been weak and non-existent.  I would love, for the first time as an adult, to see an economy built on real fundamentals, not built on a bubble.

And if it takes time to get there, that’s fine.  Because if we take the time to let the economy build itself the right way, it will not crumble so easily and we will not have the problems that come about virtually overnight as we’ve seen during the last couple downturns.

Slow and steady growth might not be sexy.  It might not look great on paper for the people who look only at six or twelve month charts, but if you want an economy that we can truly believe in again, you have to give it time.

For the sake of the next twenty years, please, no more quick fixes.

What do you think about the economic recovery?  Are you satisfied with the slower pace, thinking that this could mean it’s being handled properly, or are there ways to make it happen faster without creating another bubble?

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12 thoughts on “Slow Economic Growth Doesn’t Surprise Me, Nor Does It Concern Me

  1. This article hits the nail on the head. Real value is created when real people build real stuff, ie manufacturing and create real wealth instead of off-shoring all that wealth creation. Look at China. The wealth of the US has shifted thanks to their manufacturing acumen.

    • I know China is having economic problems of their own, so I don’t think manufacturing is a cure-all, it’s just that the sustained recovery that people are looking for (based on previous recoveries) is going to be different this time and moving forward. I think a lot of people are not understanding this.

  2. I appreciate a slow and methodical recovery. That being said, I really think this recovery is going to take a long, long time to fully mature since is was so deep and impacted so many. I also think that along the way, we will dip back into mini “recessions” as we start and stop.

    Like your article alludes, I am not concerned as my focus is on making sure my personal economy is in good health. The rest will take care of itself.

  3. I think we are in a real sensitive time. Any little thing might knock it back down. Europe and their woes aren’t helping either.

    • Very true. I think a lot of tough changes will have to happen in Europe to get things right, but hopefully that can happen without a major economic fallout.

  4. It is almost a jobless recovery. Many of the old jobs went away permanently. E+Whether it was manufacturing or lower skilled jobs. The new economy requires different skills, a more skilled worker.

    • Agreed. Michigan has high unemployment but there are companies looking outside the state for particular jobs simply because the skills aren’t here from many of the unemployed workers. Gradually, you’d hope that the skills and jobs would match.

  5. I graduated in May 2009 into the Great Recession and honestly know nothing else. I was lucky (or really honestly worked my butt off) and have been employed well since I have graduated. I hope the economy will get better because if this is how it will always be it will make me sad. Will it take a while? I definitely don’t see it happening overnight, but I never saw the growth of the 90s and 00’s from a workforce standpoint so I am skeptical. Should be interesting to see what happens!

    • That’s great that you were able to find something so quick. I hope that your entry point to the job market is the lowest point moving forward, meaning it would be pretty much all uphill from here. I entered at a point where getting a job in my area was pretty much a cinch, so seeing things tighten first after Y2K and then in the Great Recession has definitely changed my perspective a few times, probably making me a bit more negative and pessimistic. Hopefully it’s the opposite for you!

  6. We were sold a lie with NAFTA. No one cared about US jobs and I think many companies still don’t care. They are mainly international corporations now and don’t have loyalty to the economy of any one country, including the one they started in. If they actually cared and wanted to build a strong economy in the US for the long term it would be something to start building a foundation on. You can’t build a foundation on nothing. I hope we still have some companies that care about the US economy. Sorry to be so negative, but I call them as I see them.

    Individuals adjust to changing conditions as best they can. Training or retraining for jobs that can’t be outsourced and researching jobs that are expected to be in demand can help. Health care jobs seem to have good long-term growth prospects. Many displaced workers have gone back for training for these jobs and have done well with them.

    • Companies would be foolish to think that they could lay off every American worker that they have, because our economy still drives that of much of the world, and if that many people remain jobless, this does and will cause a ripple effect that would slow the global economy, which would lower their sales, and basically wipe out any labor cost savings. I think smart companies try to achieve a balance and I think this is why, at least as long as our economy remains a global driver, you won’t see companies completely abandon the USA (or if they do, those companies will not last long).

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