More Odd Behavior Leads Economists to Ask, “Has the Recovery of the US Economy Stalled?”

Since the US economic recovery began, following the “Great Recession” of 2008, things have been slow but steady. That is, they were until the first quarter of 2015. A number of growth indicators have been off for some time, but at the start of this year, the economy barely grew, and all indicators point to similarly sluggish growth right now.

Since the US economic recovery began, following the “Great Recession” of 2008, things have been slow but steady. That is, they were until the first quarter of 2015. A number of growth indicators have been off for some time, but at the start of this year, the economy barely grew, and all indicators point to similarly sluggish growth right now.

This has led some analysts, like Mark O’Brien to opine (in a piece for the Washington Post) that the US economy may be either entering a new recession period or developing a new model of slow growth. In his piece, he suggests that the “new normal” for American economic growth may be something more plodding than in decades past, and that it may even experience occasional dips into the negative, but that this does not necessarily signal a full-blown recession. He even compares this model to recent Japanese economic performance.

Many economists have pointed to the odd lack of correlation between unemployment rates and salaries during this recovery. Typically, as unemployment goes down, salaries go up, but that has not been the case in recent years. Also troubling signs for the American economy, the unusually long and cold winter and the drought conditions in some of America’s most fertile farm lands. All of these conditions have led to a stall in the growth of the economy in the first quarter of 2015.

Unfortunately, unlike in years past, the economy has not bounced back with the same sort of resilience it showed in years past. For example, 2014 saw a long, cold winter, as well, but once it ended the economy picked up quite rapidly. This year, the Atlanta Fed’s GDPNow model thinks the current rate of growth is just 0.9 percent; below last year’s rate.

Theories about why this recovery is different from in years past and why growth has virtually stalled in 2015 circulate daily. Although interest rates remain quite low, austerity measures still abound, and unemployment continues to decline, the economy has still slowed. Some, including O’Brien, believe the Fed’s announcement that it might raise interest rates has the equivalent effect of actually doing so. Those in this camp point to the fact that when the Federal Reserve said that it would like to start raising interest rates in June (even though such a rate hike may not occur thanks to this economic slowdown) the economy began to slow. Coupled with the fact that the announcement came just as other nations began cutting their own interest rates, the effect was a spike in the value of the dollar that made American products less competitive both in domestic markets and overseas.

Yet, there are more odd facts about the current American economy’s recent behavior. For example, the economy added 591,000 jobs so far in 2015, despite a GDP that remained flat (or possibly even contracted). Thus, if the US economy is entering a “double dip” recession, it is a very odd one in which unemployment drops despite GDP contraction. Still, the rule-of-thumb on calling a recession is at least two quarters of bad performance. Thus, just having a slow start to economic growth in 2015 may not be enough to call this the beginning of a second recession, but it is enough to make more than a few economists rethink a number of long-held beliefs about how economies behave in times of growth and recession.