Is the U.S. Economy Coming Back to Life?
Roger Altman Time Magazine Is the U.S. Economy Coming Back to Life?
Yes, too many Americans are out of work and have been that way for too long. And yes, household incomes, adjusted for inflation, are still below 2007 levels. Indeed, this is the country’s biggest job—to repair labor markets and get incomes moving up again. The U.S. needs growth in order to make that happen, and that’s where the news is good. Confounding so many skeptics, the U.S. is actually shifting into higher gear. Growth for this year’s second quarter, just reported at 1.7%, beat expectations but is well below the rate we should see at this time next year. Indeed, the Federal Reserve Board, not known for going out on a limb, recently raised its 2014 forecast for real growth to the 3%-to-3.5% range. And the country will likely see two to three more years of good growth, which would produce millions of new jobs and begin to raise incomes. This is one reason the U.S. stock market recently reached all-time highs.
The U.S. is the only developed country with a story like this to tell. Europe, unfortunately, is facing a long period of economic stagnation. Its financial crisis came later, and southern Europe is laboring under the burdens of sick banks and weak competitiveness. Meanwhile, Japan, where the population is falling, hasn’t seen meaningful growth in years and isn’t likely to see it now.
What is allowing the U.S. to rev up when others cannot? For one thing, the 2008 financial collapse and the deep slump that followed forced this country to make big changes. A severe financial crisis, whether at a corner grocery store, a multinational corporation or an entire nation, always leads to some restructuring. But the U.S. has restructured dramatically. Households have shed debt and are now ready to use their credit cards again. The banking system and the auto industry have been completely revamped. American business has become more efficient, and cost differentials with China are narrowing. U.S. manufacturing has stopped shrinking and is actually beginning to expand.
At the same time, the U.S. continues to enjoy built-in advantages that other nations lack: a growing population and the prospect of further immigration, big and flexible housing and stock markets, the most dynamic energy sector in the world, a huge and resilient consumer market and unparalleled technology leadership.
Now, five years after the worst economic crisis since the Great Depression, the American economy is gathering steam. Over the medium term, Americans are going to see growing job opportunities, higher wages and better asset values. To understand how this economic rebirth will unfold, it’s important to understand the five big factors driving it.
Read more: time.com