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The U.S. Economy’s Stagnation Problem

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Posted on Jun 1, 2011
Flickr / epicharmus

The economic indicators for May aren’t pretty, throwing up red flags that American job growth and factory output aren’t enough to carry the U.S. economy to recovery and forcing a critical look at the way the crisis has been managed. Although the economy was expected to add 175,000 jobs in May, private employers added only 38,000. At the same time, manufacturing output grew in May at the slowest pace since September 2009. Scholars and critics have noted the redistribution of American wealth toward the upper class, and the latest numbers demonstrate the compound problems faced by the shrinking middle class. High unemployment, low real estate values and maxed-out debt levels are choking millions of Americans even though corporate profits and stock prices have mostly recovered. The open secret is that big business has staked the bulk of its future growth on emerging economies, leaving struggling U.S. “consumers” to fend for themselves.  —KDG


The job market’s already slow recovery looks to be losing momentum, and so is the manufacturing industry.

Private employers added just 38,000 jobs in May, down from 177,000 in April, according to payroll processor ADP. It’s the weakest result since September. The report may offer a preview of Friday’s more comprehensive job report from the Labor Department, which includes hiring by both private employers and the government.

“As far as we can tell, employers have hugely over-reacted to the surge in oil prices, which has slowed but not killed consumption,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics.

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By Lew Ciefer, June 2, 2011 at 4:10 pm Link to this comment

It’s incredible how ignorant the press and government officials are with regards to basic economics. Government DOES NOT create jobs. If this were so then the heavily-botoxed and mentally distempered former Speaker of the House would be before the cameras every day patting herself on the back and kissing here own arse for having promoted the urgent—at the time—legislation that guaranteed job creation and economic growth—the unemployment benefits extension. According to the senescent Ms. Pelosi:

“Again, this is the right thing to do, it grows the economy, it creates jobs, it’s absolutely necessary that we get it done.”—Nancy Peloser (WASHINGTON, Dec. 1, 2010 /PRNewswire-USNewswire)

When a former Speaker of the House possesses an understanding of economics that makes Edith Bunker have a face-palm moment what hope is there for the nation? And why isn’t the media knocking on that klutz’s door asking her “wassup Nancy?”

Business doesn’t work on two year plans and people without jobs haven’t the income to spend on anything other than basic needs. Most with jobs are too uncertain about the future to risk purchases that they aren’t confident they’ll be able to pay for.

This current administration and its social-democratic policy—like the one that preceded it—are a calamity to economic growth and prosperity. In other words ... the Mocha Savior isn’t and one cannot help but wonder if he might not be an even bigger idiot that the village idiot that preceded him.

Derived demand? ... DUH!

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By litlpeep, June 2, 2011 at 8:00 am Link to this comment

The economy remains stagnant because Obama has Geithner preventing even the lightest touch of reforms that the so-called Banking and Finance Reform legislation last year legislated.  That legislation was a fake bill because it gave the discretion to Obama/Geithner to decide how much to do where, meaning they have to do nothing.  Which is exactly what Wall Street wants.

Which is why there have been no reforms.

Which is why the economy remains stagnant.

Wall Street has us all in an economic strangle hold.

Thank Obama and the Democrats in the US House and Senate, and their Republican collaborators.

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By mrfreeze, June 1, 2011 at 8:22 pm Link to this comment

For an incredibly insightful and sobering overview of this subject, I highly recommend you all read:

“The Great Stagnation” by Tyler Cowen

Basically, he believes that the U.S. has been operating by picking the “low hanging fruits” of free/cheap land, natural resources and (historically) cheap labour. He said we’ve finally run our course and unless (that’s a BIG UNLESS) there is a new game-changing technology or system change in our way of life, we will stagnate for the foreseeable future. Not a particularly pretty picture but until Americans face the fact that we are living in a “new normal” of declining possibilities, we will never confront and defeat our stagnant economic world.

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By prisnersdilema, June 1, 2011 at 4:02 pm Link to this comment

There has never been a recovery. No green shoots, no nothing. Just a trillion dollars
blown and in the pocket of Wall Street crooks. If the Fed hadn’t continued to funnel
money into Wall street, the market would be at 2000, years ago. Obama keeps funneling
money to Wall street while he stuffs the government with Wall streets choices from
FDA, to USDA. Men who continue to pursue the plutocracy’s agenda to the detriment of
all.. We’ve been in a depression for a long time. Just wait until we reach $5 a gallon
gas. It will be hard for Obama to cover it up with lies, no matter how pleasant they

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By Ben Donahower, June 1, 2011 at 3:29 pm Link to this comment
(Unregistered commenter)

I don’t think that the US economy will go much of
anywhere without housing recovering fully.

1)  One house is nearly always a person’s biggest
purchase and biggest asset/liability as well
depending on how you want to think about it. 

2)  If people are under water in their homes, this
severely limits their job options.  Many people limit
their job search geographical but for those who don’t
ordinarily or have liberal standards, these people
are still stuck because if they were to move for
their job they would have to take a five or even six
figure hit to do so. 

Perhaps once housing recovers again legislators
should look at ways to reduce the importance of
housing in our economy.

Likewise, we have other looming pressures on the
economy such as energy and healthcare.

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