December 08, 2011
In an article about the impact of the euro crisis on the U.S. economy the NYT told readers:
“the American economy has shown signs of life recently, with talk of a double-dip fading and job growth picking up.”
People who were knowledgeable about the economy did not talk of a double-dip recession. There was a growth slowdown in the first half of the year due to one-time factors. This was the period in which most of the federal stimulus was withdrawn, imposing a substantial drag. There was a large rise in oil prices, which was partially reversed in the third quarter (although prices have risen part of the way back to their prior peaks in recent weeks). And, the Japanese earth quake and tsunami disrupted some supply chains, most notably in the auto industry.
With these factors having passed, it was predictable that the economy would again grow at near its trend rate of 2.5 percent. This growth rate will do nothing to reduce the huge gap between the economy’s potential output and its actual output, leaving tens of millions of people unemployed or under-employed. Unfortunately, because baseless comments about a double-dip recession were given such prominence in the media, this sort of growth is viewed as being acceptable.
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