Every link of America’s observation-orientation-decision-action loop is broken. One example of a broken observation is our blindness about America’s fading economy. As seen in the worries about a lost decade ahead, similar to that Japan experienced following the 1989 bust (see Wikipedia for details). That would be unpleasant, but the reality is worse: we just experienced a lost decade.
The really bad news: the past decade was our last opportunity to address our looming problems (high debt plus retiring boomers) before they hit. We missed the turnoff for the easy options.
- Our lost decade
- Some implications
- Afterword and for more information
(1) Our lost decade
Some changes since July 1999:
- Total employment: up 5% from 134 million in July 1999 to 140 million in July 2009. (source: BLS)
- Total population: up aprox 12.7% during this period; this is not strictly comparable to the employment change (source: Census).
- Total hours worked in the private sector: down 2.5% during this period (see graph, with data thru May 2009)
The bottom line from these and other changes: the employment to population ratio, back to where it was in 1983.
Making things worse: real wages (after inflation) are flat over the past decade, for all but the top income quintile (see Wikipedia for details). Add together more people than jobs added, fewer total hours worked, flat real wages. The result: flat to down real income for most households.
This graph show results through 2007. The trend since 2007 has of course grown worse. This graph is from “Median income rose as did poverty in 2007; 2000s have been extremely weak for living standards of most households“, Jared Bernstein, Economic Policy Institute, 26 August 2008. Data is from the US Census 2007 American Community Survey.
(2) Some implications
In one sense, unknown. 1999 was a good year. 2009 is a bad year. Perhaps this is just a cycle, peak to trough — and soon the economy might begin a new boom.
For reasons discussed elsewhere (see the posts at the end), that shiny outcome seems unlikely. If so, that’s unfortunate Soon the boomers begin retiring in large numbers. This recession might have started this earlier than expected, as many people fired in their late 50’s are de facto retired.
The past decade was our opportunity to prepare. Instead we continued our orgy of borrowing, weakening our economic foundations instead of strengthening them. This muted the impact of our lost decade, much as an alcoholic dulls the pain with booze.
So we will confront the next phase of the age wave with massive household and government debt, which greatly narrows our options. The next decade or so might be the greatest challenge yet for the American republic. Perhaps even greater than the Civil War, albeit a different kind of stress. Despite the doomster’s certainties, nothing we face cannot be surmounted.
We need to hang together and act wisely. We’re done so in the past, and can do so again. But the clock is running. Time is not on our side.
Originally published at Fabius Maximus and reproduced here with the author’s permission.