Last year and the year before, when the market was highly volatile in the summer, everyone was panicking saying double-dip recession has arrived in the U.S. The media and popular market pundits created this hula-hoop about the recession. The current employment rate of 8.2% does not indicate a recession. However, economists are worried about the anemic job market that is not adding enough jobs, to keep the economy going. The signs of recovery are there, although at a slow pace. At least the economy is adding jobs every month. But the fact of the matter is, the recovery in the U.S. is going to remain slow, if our politicians don’t address the underlying problems, which are: the high employment rate, uncertain market conditions, and a weak economy.
For a recession, there has to be a contraction in all the major sectors, which is popularly measured by the reports on the manufacturing index, durable goods orders, consumer confidence index, credit index, export/ imports, oil prices, GDP, inflation and the most significantly, the unemployment rate. These measurable reports and indexes were slowly introduced after the Great Depression of 1928, to measure the strength of the U.S. economy. Prior to the Depression, there was no way of knowing how the economy was functioning. Generally, economists look at these reports to determine the health of an economy. For instance, if the unemployment rate drops to 8.3% and then the manufacturing index drops to 52, then economist and politicians would be concerned that the economy might be slipping back to recession. Of course, the economic indexes are analyzed in relation to historical benchmarks.
At this point, the U.S. are only in a slow recovery mode, everything is growing but at a snail pace. Nonetheless, this logic currently doesn’t apply to Europe. UK, France, Spain, Greece are officially in a double-dip recession. The reason: austerity measures, raising taxes on the middle class, cutting retirement benefits, long work hours, pay cuts, and very high unemployment rate. So the end result is low hiring and spending by the private sector. In the U.S., however, politicians don’t mention the word “austerity,” when, in fact, cutting back on government spending is a form of austerity. Cutting Medicare, firing people from government jobs, and cutting down on infrastructure projects doesn’t spur natural growth in a country. The leadership in the U.S. and Europe is failing to see this. Unless politicians come up with new ways to develop “organic” growth, countries will be stuck in this quagmire for a while.
