Ghost recovery in the U.S.Posted: January 8, 2011
For the last quarter, some signs of improvement in the US economy has been observed: decrease in the unemployment numbers and increase of consumer spending.
While politics are very happy to report on that, economists are more cautious and point to two key elements which are making this recovery a ghost: yes the economic indicators are improving, but the economic reality is not that much better.
- First because the consumers are spending more simply because they have not been spending anything for the past two years. They were getting tired and with the end of the year celebrations (Halloween, Thanksgiving, Xmas), they just jump on an opportunity to spend and get them out of the no-spending-boredom. This spending rely heavily on credit card and increase consumers debt.
- Secondly, more and more people just give up looking for a job, which reduces the percentage of unemployed in the work force, but does not create any job at all.
This being said, it does no mean that this ghost recovery can not sustain itself and eventually become real. But we need to be careful as better numbers does not mean stronger economy.