Many economists are warning that the United States could be heading for a second recession and if that happens it is going to be worse than the one in 2007. One of the reasons is that the economy is weaker now than it was then because the economic health is worse today. The economic health includes incomes, output, industrial production, and jobs. Basically the United States has not made up for the last recession four years ago.
There has been an increase in uncertainty and anxiety in the past few days ever since Standard & Poor’s decision to downgrade the United State’s credit rating from a Triple A+ to an AA+ plus Europe is trying desperately curb its debt crisis.
In regards to jobs, in the four years since the first recession the working age population has grown about three percent and if the economy was healthy the number of jobs would have grown at the same rate but instead the number of jobs has shrunk by approximately five percent. This is approximately seven million less jobs than when the last recession started with the unemployment rate at five percent then and nine percent now. Although some are working there are many who are working a shorter work week than they were four years ago.
After adjusting for inflation personal income is down four percent. A recession recovery is usually driven by housing and consumers spending but the incomes are so weak that spending is just barely there at the point it was when the recession in 2007 hit. But the industrial production is the worse.
There are also arguments that go in the other direction and say if the United States gets hit with another recession that it will not be worse. All anyone can do now is play a “wait and see” game and hope for the best.