Is the economy really broken? Depends on who you ask

posted by Jeff | Thursday, August 4, 2011, 1:15 PM | comments: 0

The more I watch the news, the more I start to ask if the economy is truly broken. The more I look at it, the more I start to think that it's frankly not as bad as the headlines would indicate, but it also isn't where it was a few years ago. It seems to me that the economy made a huge adjustment, and we're now living the new normal. This seems particularly true when you look at 2008 as a baseline.

A lot of people look at unemployment as a key metric, and that certainly makes sense. Things started to go south in the middle of 2008, and unemployment is just short of double what it was then. It improved a little over the winter, but then slid a little since then. One of the statistics I read suggested that a lot of this has to do with the fact that the number of government jobs cut has been enormous, especially at the state and local level. If the population make less money, that certainly makes sense since there's less tax revenue. Given that cyclical problem, I'm not sure that unemployment is a very good indicator.

The US dollar is on an ever so slight increase in the last two months, but it's doing slightly better than it was two years ago. The major stock indices are also up over the last two years. The GDP is flat, but that isn't surprising given the scope of the "adjustment."

There are a lot of anecdotal things that also lead me to believe things are getting better. Internet ad sales set a new record last year after a bit of turbulence. US auto sales were actually up last year. The amusement industry is having one hell of a good year. Las Vegas didn't seem empty this time when I was there in April. I'm getting a ton of cold recruiting calls these days, even from Cleveland.

For met at least, it just doesn't feel like things are all that bad.

This is not to say there aren't issues. The state and local government revenue crunches are a real problem. It's fashionable to slam government spending, but I honestly believe that some states and most municipalities do deliver value for tax dollars. There is also the problem where entire categories of blue collar jobs no longer exist, and retraining those folks is hard (especially if they're unwilling). And of course, we have the housing problem, where billions of dollars of value have been wiped out and will never come back, but there's nothing we can do about that.

I suppose my observation is that we simply have to adjust to the adjustment.


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