When Jim O'Neill, Goldman Sachs's celebrated Asset Management director, dubbed 2011 "the year of the USA" two days before Christmas last year, his brand of optimism wasn't rogue. He was merely the loudest member of a growing crowd of market cheerleaders.
The poison and crud from the recession had finally worked its way through the economy, they said. Corporations were flush with cash and ready to hire. Financial institutions were swimming in profits and ready to lend. Housing prices had taken a beating, but that was a good thing in way. Homes were affordable again, and families who had spent two years shedding debt were itching to buy something big.
So how did 2011 turn out so poorly? Six months later, unemployment is still above 9%. Small business sentiment, which fell for the third consecutive month in May, is lower than a year ago. Real wage gains still look like a pancake, and the American Consumer -- the world's greatest engine of growth -- is showing up like LeBron James in the fourth quarter of a Finals game.
High gas prices hurt consumers and businesses. Europe's never-ending debt trauma hurt exports and the stock market. But you can't blame it all on the rest of the world. You can't even blame it all on Washington.
Economists at the IMF like to talk about a global "two-speed recovery." That means China is battling inflation with 9% yearly growth, while Europe and the U.S. are fighting double-dips with sub-2% growth. But there's a two-speed recovery at home, as well. Financial companies and multinationals are enjoying record profits, and the stock market has recovered better than most analysts expected.
But the wealth isn't trickling down. Small businesses -- which account for 99 percent of all companies and two-thirds of all hires -- are selling into a weak consumer market. Banks know it, so they're withholding loans. It's a cappuccino economy: The top is as frothy as the bottom is static.
At the top of the economy, financials and multinationals are growing, but they're making do with fewer workers. At the bottom of the economy, small businesses aren't growing, and they're not hiring workers. Two speeds, one reality: It's hard out there for a worker.
Full Article
Source: The Atlantic
The poison and crud from the recession had finally worked its way through the economy, they said. Corporations were flush with cash and ready to hire. Financial institutions were swimming in profits and ready to lend. Housing prices had taken a beating, but that was a good thing in way. Homes were affordable again, and families who had spent two years shedding debt were itching to buy something big.
So how did 2011 turn out so poorly? Six months later, unemployment is still above 9%. Small business sentiment, which fell for the third consecutive month in May, is lower than a year ago. Real wage gains still look like a pancake, and the American Consumer -- the world's greatest engine of growth -- is showing up like LeBron James in the fourth quarter of a Finals game.
High gas prices hurt consumers and businesses. Europe's never-ending debt trauma hurt exports and the stock market. But you can't blame it all on the rest of the world. You can't even blame it all on Washington.
Economists at the IMF like to talk about a global "two-speed recovery." That means China is battling inflation with 9% yearly growth, while Europe and the U.S. are fighting double-dips with sub-2% growth. But there's a two-speed recovery at home, as well. Financial companies and multinationals are enjoying record profits, and the stock market has recovered better than most analysts expected.
But the wealth isn't trickling down. Small businesses -- which account for 99 percent of all companies and two-thirds of all hires -- are selling into a weak consumer market. Banks know it, so they're withholding loans. It's a cappuccino economy: The top is as frothy as the bottom is static.
At the top of the economy, financials and multinationals are growing, but they're making do with fewer workers. At the bottom of the economy, small businesses aren't growing, and they're not hiring workers. Two speeds, one reality: It's hard out there for a worker.
Full Article
Source: The Atlantic
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