In the 1950s, the reknowned Nat King Cole sang a song called “Unforgettable.” For the U.S. economy, 2010 was the opposite, most forgettable.
Oh sure, a lot happened. But who remembers mile 18 in a 40-mile forced march? That’s if 2010 did represent mile 18. Maybe it was mile 23. It wasn’t mile 37.
Back near the start of 2010, Obama economic aide Larry Summers properly described the U.S. economy, calling it a “statistical recovery and a human recession.” The phrase outlasts Summers, who just left the employ of the administration.
To gauge 2010 in the U.S. economically, you only need one number. That’s the unemployment rate. We came into this year high, and we’re leaving high. In November 2009, the U.S. unemployment rate was 9.4 %. A year later, November 2010, it was 9.8%.
If we can’t get more people working in an economy driven largely by consumer spending we’re not getting anywhere in a hurry. Thus, the long slog, the forced march, with no evident end date that would equal significant enough growth to chop bunches of decimals off the unemployment rate.
A nuance on unemployment that makes the problem even tougher. A debate arose about what part of that nearly 10% jobless rate was structural, not just a result of a minimalist recovery. You used to employ an awful lot of people in construction. No more. It’s not easy for those people to shift to other fields.
More generally, globalization is exposing our education deficit. People without college degrees have a much higher unemployment rate than those with degrees. That gap likely won’t narrow, even when the recovery gets stronger.
Some people are structurally unemployed because they can’t sell their houses and move to places where jobs are more plentiful. Housing prices in 2010 in most parts of the country didn’t add anything to owners’ feelings of material well being. Just the opposite in many cases.
The stock market helped a bit. Zero interest rates and a late-in-the-year launch of a bond buying spree by the Federal Reserve convinced many that stocks were the place to be. Corporate earnings held up as expenses were kept spare. Compared with Dec. 31, 2009, the Dow Jones Industrial Average at this writing is up more than 10%.
A few words about the Fed. There were few more striking years in recent memory than 2010. With short-term interest rates dialed to zero now for two full years and likely for at least most of 2011, the Fed got creative. The Treasury note and bond buying ($600 billion over a number of months) is controversial. There’s understandable skepticism about whether it will eventually get us more jobs. But the Fed’s taking its double mandate seriously (sustainable growth and controlled inflation).
So much so that at a least a few in Congress are talking about taking one of the mandates away (the high employment one). It’s been a long time since the Fed has been so stuck in the middle of the politics of the day. In 2011, it won’t get better. They’ll get to deal with a House subcommittee overseeing them led by a decades-long nemesis, Rep. Ron Paul of Texas.
Let’s end with some rays of hope. It is the season. Companies are flush with cash. Some optimism could get them spending and hiring. The people with jobs are feeling a bit more confident. Retail sales this holiday period seem somewhat stronger. Housing might finally be near a bottom.
Best guess: 2011 will feel a lot like 2010, but a little better. Maybe mile 29.