The Great Recession was a moment of truth for American society. Constantly rising living standards were ingrained in our societal outlook, as achieving the American Dream had always been the backbone of our national self-esteem. For decades, a steadily growing economy was always assumed as, at least in our minds, success was a sure thing if you worked hard enough. Economic crisis was something we only read about in the papers when some far-away country acted irresponsibly and couldn’t repay its debts. Our wake-up call came in the form of a severe economic disruption, when the Great Recession taught America that good times were not always guaranteed.
Today, the reverse is true, as Americans are deeply insecure about the economy. Any bad news seems to validate our deep-seated fears that we’re once again going to be in crisis mode. It’s been nearly seven years since the US economy emerged from the Great Recession, and many people are waiting for the next shoe to drop.
Even as a reporter, it’s hard to look at the economy objectively with the Great Recession so fresh on my mind. My working adult life has been characterized by an economy that just never seems to recover. Only recently has the economy seemed somewhat stable. Stable enough that Federal Reserve finally upgraded the economy from life support and raised interest rates.
But now there’s reason for renewed doubt, because we’re currently encountering a hiccup that is giving people the jitters. After the ball dropped on New Year’s Eve, the stock market fell along with it. The first week of the year was the worst ever on record for the Dow Jones Industrial Average. Whether we’re headed for another recession or not is the elephant in the room of macroeconomics. Let’s take a look at the good, the bad and the ugly in the world of current business trends to see what factors into this year’s economic forecast.
Forget the sudden snag in stocks because many believe a correction was overdue following a very long run-up and possible overvaluation. In reality, the stock market is meaningless for many Americans, and has very little correlation with their real economic existence. A whopping 52 percent of Americans don’t have any money invested in stocks or mutual funds.
A very real number to many Americans is the unemployment rate, which according to the latest jobs report, continues to trend downwards. At 5 percent, the last time unemployment was this low was in January 2008. Gainful employment is what matters to us the most, and with hiring still robust, it’s hard to believe that the economy is headed for hard times.
Another bright spot in the economy is low gas prices. The news is dominated by oil touching some multi-year low daily. Cheap gas is great for consumers, and translates into more cash in our pockets. Because 70 percent of the economy is dependent on consumer spending, consumers with more cash is great news for the economic forecast. Factoring in low unemployment, affordable gas, and rock-bottom interest rates, some say it’s difficult to make the case that we’re going to fall into a recession.
Emerging markets, especially China, are having a hell of time, which explains the stock market bust. A weak global economy is never good news for anyone in an interconnected, globalized world. A crisis can quickly spread in the modern world, so instability somewhere can find its way to nearly anywhere.
Additionally, the weakness of many major economies around the world is causing the US dollar to strengthen. A strong dollar makes our exports uncompetitive, and weakens foreign-earned profits. This does not bode well for multinational corporations as they earn a large portion of their profits abroad.
There are some long-term structural problems with the US economy that are ugly truths in our economic lives and cloud our future. The latest jobs report once again showed that wage growth continues to be non-existent. Americans at all income levels need a raise, and that simply hasn’t happened yet. Another sad reality is that the participation rate in labor force has been trending downward. Many say that explains much of the drop in the unemployment rate.
The future of consumer spending is also not looking too hot. Baby boomers are now going to begin retiring in massive numbers, and they haven’t saved nearly enough. Newer generations are strapped with large amounts of student debt. That leaves many scratching their head as to who will be able to afford the mass consumption that powers the majority of our economy.
Our economic outlook is a mixed bag. Perhaps 2016 will not be a boom or a bust, but instead just another year of wobbly economic growth. Right now, growth prospects in the United States are looking pretty attractive when you compare us to other major economies. But after almost seven recession-free years, many are anticipating that the next economic downturn can’t be far off. And with interest rates still at historic lows, no one really knows what the Federal Reserve would do if they had to stimulate the economy in the event of another economic mishap. Fortunately, for President Obama, it’s likely a problem that the next president elected in 2016 will inherit.
Photo by free pictures of money
David is the Editor of Bold. He's especially passionate about millennial economic empowerment. A former local news reporter, David is originally from the Little Havana area in Miami, and later became a pioneer resident of the Disney-inspired town of Celebration, Florida. David holds a Master’s in Public Policy from the Harvard Kennedy School.