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Archive for January, 2010

Lost Decade For U.S. Economy and Workers

For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.

The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation’s growth.

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism — there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 — and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.

“This was the first business cycle where a working-age household ended up worse at the end of it than the beginning, and this in spite of substantial growth in productivity, which should have been able to improve everyone’s well-being,” said Lawrence Mishel, president of the Economic Policy Institute.

Big Banks Still Playing the Game

After staging one of the most remarkable comebacks in business history — because of taxpayer lifelines and other support from Washington — the giants of the banking industry are entering a new phase of the post bailout period.

While, for many Americans, the dark fears of the crisis have given way to indignation over the Lazarus-like recovery at big banks, few on Wall Street expect 2010 to be as profitable as 2009.

All told, the half dozen biggest banks have already made more than $50 billion in the first three quarters, and are on track to deliver a year of hefty profits — and bonuses — that could rival those of the boom years.

But at this pivotal moment, big questions loom: Will the economy stage a robust recovery or just muddle along? Will the stunning rally in the stock market last?

As the debate rages over how to prevent future crises, will Washington impose tough new rules on banks? More important, will banks fundamentally change the way they do business, or simply carry on as before?