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:
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?