The Impotential of America’s Economy

YOU WILL OFTEN HAVE TO ACT WHEN THE FOG OF UNCERTAINTY IS HEAVY
Americans are distraught again. Just when they thought brisk growth would quickly return the economy to its long-term potential, sluggish growth reared its ugly head and persistently high unemployment disheartened almost everyone.

Unemployment is high, and the longer people are unemployed the longer they are likely to stay that way. Eventually, they may become discouraged and drop out of the labour force. It can be very hard to disentangle how much unemployment is cyclical and how much is structural because each tends to increase during recessions.

Economists advance several explanations for this dichotomy. The drop in unemployment may simply be mechanical, a snapback after employers fired workers too indiscriminately during the recession. Inflation has been underpinned by the indirect effects of higher commodity prices, rising rents and the influence of stable inflation expectations on prices and wages. Optimists say that GDP may be revised up later. So, yes, we are going in the right direction—but far too slowly to create reasonable economic growth and needed jobs.

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