It’s not just that economic recovery is elusive; it's illusive.
As Mort Zuckerman explained in the Wall Street Journal this morning the American economy is stagnant. True, the media is touting a great recovery and the stock market keeps rising, but, Zuckerman suggests, the recovery is a “Grand Illusion.”
In his words:
The Great Recession is an apt name for America's current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.
The country isn't really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.
Zuckerman has been reporting on the story for years now. He has not been fooled by the rosy scenarios painted by the media and the politicians.
He continues to try to give us some needed perspective on our economic conditions.
February's headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be "outstanding" and "amazing." But if you account for the people who are excluded from that number—such as "discouraged workers" no longer looking for a job, involuntary part-time workers and others who are "marginally attached" to the labor force—then the real unemployment rate is somewhere between 14% and 15%.
Other numbers reported by the Bureau of Labor Statistics have deteriorated. The 236,000 net new jobs added to the economy in February is misleading—the gross number of new jobs included 340,000 in the part-time, low wage category. Many of the so-called net new jobs are second or third jobs going to people who are already working, rather than going to those who are unemployed.
The number of Americans unemployed for six months or longer went up by 89,000 in February to a total of 4.8 million. The average duration of unemployment rose to 36.9 weeks, up from 35.3 weeks in January. The labor-force participation rate, which measures the percentage of working-age people in the workforce, also dropped to 63.5%, the lowest in 30 years. The average workweek is a low 34.5 hours thanks to employers shortening workers' hours or asking employees to take unpaid leave.
Of course, the stock and bond markets seem to be telling a different story. If Zuckerman is right, the markets are simply not telling the truth.
We know that the bond market is being propped up by the Federal Reserve. Given how low interest rates are, investors seeking a return have had to rely on stock dividends. We also know that American markets have been attracting foreign assets because they are the safest alternative.
Would you rather keep your money in a European country that might decide to confiscate it tomorrow or in the United States, where such an eventuality seems far less likely?