President Obama, in speech after speech, proudly makes the following point: Although we inherited the worst recession since the Great Depression, we have generated net new jobs every month, and while we need to do more, we are going in the right direction.
Of course, recoveries always go in the right direction—that is, things get better over time. But merely going in the right direction is an incredibly low performance standard. Moreover, since deep recessions are generally followed by more robust recoveries, this should have been one of the strongest recoveries ever.
So what went wrong? All the available Keynesian levers for achieving economic growth have been pulled, yet the recovery is one of the weakest since World War II. The problem lies with the way the “stimulus” was carried out, the uncertainty of looming higher taxes, and the antibusiness rhetoric and regulatory strong-arming of this administration.
First, exactly how weak has this recovery been? The Federal Reserve Bank of Minneapolis tracks economic performance for each recovery and compares gross-domestic-product growth and job growth, the two most important indicators of economic performance. Over the past 60 years, there have been 11 recessions and 11 recoveries.
Sadly, this recovery is near the bottom of all 11. Cumulative nonfarm job growth is just 1.9% 34 months into the recovery, the ninth-worst performance and well below the average job growth of 6.5 percent. Cumulative GDP growth is just 6.8 percent 11 quarters into this recovery, less than half the average (15.2%) and the worst of all 11.
Economies have cycles, and despite the utopian dreams of the central planners, the downturns and upticks cannot be easily prevented or brought about by specific presidential polices, so a lot of us (including me) are apt to engage in a little partisan exaggeration when it comes to holding them liable. But the signals sent by an administration matter, I think, and can speed up or slow down a recovery. Some businesses, especially small to medium ones, have been holding back on investments that would create jobs because they're unsure of what's coming from this administration, or they think they know what's coming and "antibusiness rhetoric and regulatory strong-arming" give them a pretty good clue.
