September 8, 2011

Economic Situation: What's Changed Since May

Bruce Yandle

Distinguished Adjunct Fellow

Will we get a double-dip, another two consecutive quarters of negative GDP growth? Close perhaps, but not the real thing. That said, there is little difference between vanishingly small and negative GDP growth as far as consumers and businesses are concerned. Still, the prospects overall say the U.S. economy—led by manufacturing—is doggedly moving to higher ground. 

Stimulus programs that target health care, education, school construction, and the unemployed just don’t do much for the housing overhang. Unlike these actions, the special tax treatment for first-time home buyers did address the problem. But it’s crazy season in America. Election fever is in the air. Stimulus programs that affect organized voting groups are more valuable politically than those that simply spur the economy.

We have a structural unemployment problem that is linked to the great housing contraction, and only time and slow growth will deal with it. The result is seen in a growing number of job openings that are not being filled, even though unemployment stands at a high level.