The unreal recovery

US president Barack Obama claims his stimulus package saved two million jobs, averted a second Great Depression and triggered the weak recovery. But with unemployment still at 10 per cent, Americans just aren't buying it.

On the one-year-anniversary of the signing of the American Recovery and Reinvestment Act, President Obama gave a spirited defense of his administration's stimulus spending. The Recovery Act, he asserted, "rescued the economy from the worst of the crisis." Failure to enact it, he claimed, "would have led to catastrophe." Because of it, he said, two millions Americans "who would otherwise be unemployed" currently have jobs.

He noted that in January 2009, the US economy lost 800,000 jobs, and in the first quarter of the year, GDP shrunk by "an astounding 6.4 percent." But in January 2010, the economy lost only 20,000 jobs, and in the fourth quarter of 2009, GDP grew by "almost 6 per cent."

"A second Depression is no longer a possibility," he declared.

Let's hope so. Moments before the president spoke, the government reported that both industrial production and housing starts had risen in January. In both cases, the numbers were better than economists had expected, giving some support to the narrative of a recovering economy. But not much. Industrial production is still ten percent below its pre-recession levels; and housing starts have bounced up and down around the same anemic level for the last eight months.

But even if the numbers are proof of an ongoing recovery, most Americans just don't care. The only statistic that means anything is unemployment, now. As long as it hovers near 10 per cent, Obama can shout until he is blue in the face about how much worse we'd all be without the Recovery Act and it won't make a damn bit of difference to his poll numbers.

You can make a pretty picture displaying how much better the current jobs situation is than what prevailed a year ago, but asking Americans to imagine an alternate reality in which the US is still stuck deep in a recession or sliding into a Depression isn't an easy sell. And that's natural: We are obviously more likely to care about how we feel today than how we would have felt had things gone differently.

And we don't feel good. Obama acknowledged this. "It doesn't yet feel like much of a recovery, " he said. And he vowed to keep working, and called on Congress to pass a jobs bill.

But his words were unlikely to change the reality that, according to a CBS-New York Times poll, only 6 per cent of Americans believe that the stimulus has created jobs. The only thing that will change that consensus is falling unemployment. And since Obama's own economic advisers don't anticipate any significant decline in the unemployment rate for years to come, the political prognosis for Democrats, and Obama, looks pretty bleak.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles