WASHINGTON — An economy growing by 2 percent a year might be tolerable in normal times. Today, it is a near- disaster.
A growth rate of 5 percent or higher is needed to put a major dent in the nation’s 9.6 percent unemployment rate. Two reasons why that is unlikely well into next year and maybe beyond:
• Construction — residential and commercial — collapsed last year. It isn’t expected to regain its strength for years. Typically after recessions end, construction booms and powers a new economic expansion.
• The recession that began in December 2007, after the housing bubble burst, became the Great Recession once the financial crisis erupted in September 2008. Economic recoveries that follow a financial crisis are typically sluggish. Banks usually take years to resume lending normally.
“To really get ‘Morning in America’ and get people feeling like jobs are really coming back, I would want to see something close to 5 percent” annual economic growth, said economist Josh Bivens of the Economic Policy Institute, referring to the iconic 1984 Ron ald Rea gan re-election ad.
That isn’t likely to happen soon. Macroeconomic Advisers doesn’t expect the labor market to recover the lost jobs at least until 2013. Other economists say it could be 2018 or longer.
The government reported Friday that the nation’s gross domestic product, the broadest measure of goods and services produced, grew at an annual rate of 2 percent from July through September. GDP had risen at an annual rate of 1.7 percent in the second quarter.
