Economic Recovery and Deepening Trends

Public Perception Pessimistic on Prosperity

If you were to ask a typical American about the state of the economy, you would get a fairly dire picture. A deep recession for the past seven years, soaring unemployment, a GDP falling behind China. How we yearn for the go-go 80s!

A recent poll from PRRI reports 72% of Americans believe the US is in a recession. This is hardly new, with regular polls going back seven years painting a similar picture. A whopping 80% believe that the size of China’s economy is comparable or better than the US. Unfortunately, I do not have a specific poll number regarding perception of unemployment, but it is a common cohort in discussions and articles that I have seen. Particularly common is the “informed” person who tells you that the ‘official’ unemployment doesn’t include people who have given up looking for work, and the real numbers are much, much worse.

Really??!?

These topics are not opinions, they are actually demonstrable facts with specific definitions. I am not claiming that everything is sunshine and rainbows in our economy, but let’s at least be correct in our statement of the facts. A quick look at some of these numbers. First, unemployment numbers going back to 1980:

Clearly unemployment has been on a steady road to improvement, with a rate of recovery steeper than any since 1983. As a nod to those who say that unemployment is a misleading number, let’s look at the employment numbers instead, also going back to 1980 for comparison. These are number of people who are actually employed or “seeking employment” divided by the US population at that time. While the total percentage of the US that wants to be employed is not as high as last decade, it is way above the 1980s and 1990s levels. What drop can be seen is immediately after the economic downturn, and has been slowly increasing since then. There is no sign of the “hidden unemployed” in these numbers.

The issue of China surpassing the US economy is fairly easy to debunk. USA 2014 GDP: $17.4T ($46.4k per capita). China 2014 GDP: $10.4T ($3.9k per capita) (source: TradingEconomics.com). Is the US GDP on the decline? The numbers below are the annual rate of growth. This shows numbers that are somewhat lower than average, but still represent consistent, meaningful growth. 

The Sad Truth: It’s Not the Economy, Stupid

There is a lot of talk about “under-employment” hiding the true employment numbers. What that term means is hard to quantify, and even harder to get direct numbers on. However, if “under-employment” is on the rise, we would expect to see more people earning less, and the wages of the bottom 50% to be dropping. Let’s look at the numbers.

This is where the real economic downturn can be seen. The bottom income levels and the poverty rates have been hit, and are not improving. However, even here, the common perception is missing the point. There is no increase in the number of “under-employed.” What we see here is the bottom of the economic spectrum was declining before the recession, and was further damaged by the recession like (nearly) everyone else. However, like the other economic groups, it has not improved. It has not participated in the recovery, but it has not gotten worse either. While the economy as a whole improves, the bottom 20% are stuck in place. This is not an economic issue, this is a wealth disparity issue, and improving the economy even more is not going to help these people.

While most Americans seem to think there is something rotten in the economy, it is highly unlikely that this issue is what they mean. There is a very real problem affecting a large portion of our citizens, and yet the focus is still on the perceived failings for the middle and upper segments. To provide any meaningful solution to give relief to the people who need it most, we need to know the facts and provide a focused plan to solve the real problem.