The U.S. has an economic crisis on its hands that one economist thinks is worse than the Great Recession.
Over the past year, productivity has increased just 0.3 percent and a mere 0.5 percent over the past five years, during which the economy has struggled to escape the clutches of the financial crisis and the recession that supposedly ended in mid-2009.
The result has been growth in job creation but little corresponding rise in wages and, subsequently, living standards. It’s essentially been the economy’s dirty little secret even as Wall Street forecasters continue to project breakout growth that never seems to come.
“This topic is still getting almost no attention—particularly among presidential candidates—but there is a case to be made that the stagnation in productivity has been more damaging to the real living standards of Americans than the Great Recession,” Paul Ashworth, chief U.S. economist at Capital Economics, said in a note to clients. “Productivity growth is the primary driver of gains in real wages.”
Indeed, wage growth has been stuck around 2 percent or lower growth for pretty much all of the post-recessionary period. So while stock market investors enjoy the fruits of never-before-seen easy monetary policy—with the S&P 500 up about 210 percent since March 2009—it’s been a different story for much of the labor force.
“The longer this slump goes on, the harder it is to believe that the economy will just snap out of it,” Ashworth said. “For all the talk of secular stagnation and permanently weak demand, it may be supply-side problems that are the bigger problem.”
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