America’s presidential
election is now just six months away. If history is a reliable guide,
the outcome will depend significantly on the economy’s performance
between now and November 6, and on Americans’ perception of their
economic future under the two candidates.
CommentsAt
the moment, America’s economy is limping along with slow growth and
high unemployment. Output grew by just 1.5% last year, and real GDP per capita
is lower now than before the economic downturn began at the end of
2007. Although annual GDP growth was 3% in the fourth quarter of 2011,
more than half of that reflected inventory accumulation. Final sales to
households, businesses, and foreign buyers rose at only a 1.1% annual
rate, even slower than earlier in the year. And the preliminary estimate
for annual GDP growth in the first quarter of 2012 was a disappointing
2.2%, with only a 1.6% rise in final sales.
CommentsThe
labor market has been similarly disappointing. The March unemployment
rate of 8.2% was nearly three percentage points above what most
economists would consider a desirable and sustainable long-run level
rate. Although the rate was down from 9% a year ago, about half of the
change reflected a rise in the number of people who have stopped looking
for work, rather than an increase in job creation and the employment
rate.
CommentsIndeed,
the official unemployment rate understates the weakness of the labor
market. An estimated 6% of all employees are working fewer hours per
week than they would like, and about 2% of potential employees are not
counted as unemployed because they have not looked for work in the past
few weeks, even though they would like to work. Adding these individuals
to those officially classified as unemployed implies that about 15% of
potential labor-force participants are working less than they want.
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