Recovery Still Has a Way to Go

The sluggish recovery of the U.S. economy is in its fifth year as of this month. Unemployment remains too high — though recent data on jobs has been good and the recovery looks set to accelerate, according to economic research firm Moody’s Analytics’ Chief Economist, Mark Zandi.

Zandi – writing in Moody’s “US Macro Outlook: How the Labor Market Heals,” report – pointed out that five years is about average as an expansion period for a recovery.

Looked at historically, therefore, we should be nearing the end of the recovery expansion. What that means is that another recession would likely be expected soon, if historical trends were to be repeated.

However, Zandi sees an acceleration of recovery, not a contraction, in our near future. As he further points out, payroll employment reached a five-year high in May. The U.S. has now, (finally!) replaced the 8.7 million jobs lost in the recession.

Job growth has accelerated since the start of the year, to 200,000 new jobs per month.

Real GDP is running at a brisk 4% growth in this quarter. (Zandi is quick to add that this impressive number actually exaggerates the health of the economy, since it reflects the economy’s rebound from a weather-induced slump coming out of the winter.)

So, we’re getting the good and the bad from Zandi’s forecast. An acceleration in hiring and economic growth would indeed be wonderful. The fact that the economy has replaced the jobs lost in the recession is also positive.

However, our population has grown in the past five years, so we actually need more like 10 million jobs to “feel recovered” as an economy. There are far too many people still who have been out of work for long periods of time – sometimes years.

If this acceleration happens as expected, we may yet get to the point where the bad economy of the past five years feels, well, past. Let’s hope that Zandi is right with this prediction.


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