It’s bad, and getting worse.
The U.S. economy risks getting stuck in a prolonged period of low-growth amid slowing productivity and a shrinking middle class, the International Monetary Fund (IMF) has warned.
The U.S. economy grew at an annual rate of 1.2 percent in the second quarter this year, following a downwardly revised 0.8 percent gain in the first quarter, according to the U.S. Department of Commerce. That marked the third straight quarter in which the U.S. economy grew at lower than 2 percent, the weakest period in four years.
The weaker-than-expected economic data underscores the continuing frustration about the current U.S. recovery, which has repeatedly failed to shift to higher gear in the past seven years.
The U.S. economy has grown at an average pace of 2.1 percent since the recession ended in the mid-2009, registering the weakest U.S. economic expansion since World War II. During the postwar period up to the current recession (1947-2007), the average annual growth rate for the United States was 3.4 percent.
The IMF warned in June that the United States faces “potentially significant longer-term challenges” to strong and sustained growth, including a shrinking labor force and middle class.
Recoveries grow increasingly feeble
A report from the Economic Policy Institute reveals that recoveries are slower with each succeeding recession:
More from the EPI:
One key gauge of the severity of recessions is the output gap, which measures the difference between the economy’s actual output and its potential output if all resources (including workers) were fully employed. At the trough of the Great Recession in June 2009, the output gap was 7.1 percent, equivalent to over a trillion dollars. The only larger output gap in the postwar period was the 7.6 percent gap recorded at the trough of the early 1980s recession in the last quarter of 1982. Cumulatively, the losses over the Great Recession and the sluggish recovery dwarf even those from the early 1980s recession. The output gaps at the trough of the early 1990s recession (the first quarter of 1991) and that of the early 2000s (the final quarter of 2001) were 2.6 and 1.8 percent, respectively.
And the gold goes to. . .
From the World Socialist Web Site:
Hundreds of retail stores have been shut over the past two years as the impact of relentless cuts in wages and pensions and the permanent destruction of decent-paying jobs, combined with sweeping cuts in social programs, have thrown tens of millions of working class families into poverty or near-poverty. The bankers and speculators have placed relentless pressure on the chains to cut costs and increase profit margins at the expense of their employees and the general public.
The surge in stock and bond prices both in the US and internationally, which has further enriched the capitalist elite, has come amid mounting indications of stagnation and slump in the real economy and a worsening social crisis. Economic growth in the US, Europe, Japan and China has slowed to a crawl. New figures released Friday pointed to a slowdown across the entire Chinese economy, with factory output, business investment and retail sales all failing to meet economists’ projections.
The euro zone economy grew by a paltry 0.3 percent in the second quarter, with Italy failing to register any growth and the German economy expanding at a reduced rate.
Gross domestic product in the US is barely increasing, rising only 0.8 percent in the first quarter and 1.2 percent in the second. Both labor productivity and business investment are falling sharply, reflecting the systematic diversion of resources from productive investment to financial speculation and parasitic activities such as stock buybacks, dividend increases and mergers and acquisitions.
US corporations, flush with cash extorted through the slashing of wages and benefits and the imposition of speedup, are hoarding $1.9 trillion. They refuse to invest in new plants and equipment that could provide decent jobs and address the decay of the country’s bridges, roads, schools and housing because the profit margins are too low, preferring instead to speculate on the market and buy back their own stock to increase the take of big investors and inflate the bonuses of top executives.
More from the Associated Press:
Income inequality has surged near levels last seen before the Great Depression. The average income for the top 1 per cent of households climbed 7.7 per cent last year to $1.36 million, according to tax data tracked by Emmanuel Saez, an economics professor at the University of California, Berkeley. That privileged sliver of the population saw pay climb at almost twice the rate of income growth for the other 99 per cent, whose pay averaged a humble $48,768.
But why care how much the wealthy are making? What counts the most to any family is how much that family is bringing in. And that goes to the heart of the income-inequality debate: Most Americans still have yet to recover from the Great Recession, even though that downturn ended seven years ago. The average income for the 99 per cent is still lower than it was back in 1998 after adjusting for inflation.
Meanwhile, incomes for the executives, bankers, hedge fund managers, entertainers and doctors who make up the top 1 per cent have steadily improved. These one-percenters account for roughly 22 per cent of all personal income, more than double the post-World War II era level of roughly 10 per cent. One reason the income disparity is troubling for the nation is that it’s thinning out the ranks of the middle class.
Incomes in California follow the pattern
The Golden State is, increasing, golden for those at the top, lead for those below.
Consider this graphic from the Public Policy Institute of California:
More from the Institute:
Over the past three decades, the distribution of pre-tax cash income in California has been driven by broad, long-term economic forces—although economic booms and busts also figure in. We can track changes in the spread of incomes since 1980 by measuring family incomes at the top, middle, and bottom of the ladder.
Top income levels (at the 90th percentile) were 39.7 percent higher in 2014 than they were in 1980, while low incomes (at the 10th percentile) were 18.6 percent lower. The middle-income level (at the 50th percentile) in California is a mere 5 percent higher than it was in 1980.
California’s economy has experienced a number of boom-and-bust cycles in the past three decades, and incomes across the spectrum have clearly been affected by the gains and losses of these cycles. However, their effects have been uneven. Top incomes have contracted in bust periods, but they have typically rebounded fairly quickly and have gained additional ground. Over the long term, top incomes have increased well beyond 1980 levels. Middle incomes gained some ground in the late 1990s and early 2000s, rising roughly 10 percent above 1980 levels, but these gains disappeared during the last recession. Low incomes declined the most during each of he major recessions since 1980 (early 1980s, early 1990s, and late 2000s) and did not rise above 1980 levels during recovery periods. In 2006, after the growth period of the late 1990s and early 2000s, the 10th and 20th percentiles of income had rebounded to 1980 levels, but the Great Recession took hold soon after. These trends at the bottom, middle, and top of the income ladder add up to a long-term divergence of family incomes in California.
According to the most recent data (from 2014), the median family income before taxes and adjusted to represent a family of four in California is about $69,000. Incomes at the bottom are $15,000 or less, while the top incomes are $198,000 or more.