Recovery without Prosperity

The United States has returned to a stage of economic growth that stands out in the recovery of its basic economy. The growth rate in the second trimester of this year is increasing in inter-annual terms around 4 percent, unemployment is dropping (the rate is at 6.2 percent), millions of jobs have been created since the end of the recession and all of that came about in addition to a strict control of the public finances (the public deficit in 2014 will be less than 3 percent).

The economic policies applied in the U.S. are overwhelmingly more effective than the austerity policies in Europe. From this side of the Atlantic, there is no doubt that the United States is in a distinct economic phase; it is true that the housing market has not responded, but the development can be described in general terms as somewhat satisfying. And it is largely attributed to the Federal Reserve’s monetary decisions, far from any prejudice, and to the expansion programs that in Washington don’t turn out to be as unorthodox as those in Brussels.

However, Americans: Perceptions are far from reflecting any type of satisfaction. [American people] pay a lot of attention to very clear signs that indicate the current growth stage is not prosperity; today’s situation is nowhere near as good as life was before 2007. It is necessary to explain why the true growth of the economy is far from its potential growth. The questions come in a cascade: Why doesn’t the housing market recover? What is the reason for the drop in geographic mobility, which was one of the factors that explained the U.S. economy’s proximity to full employment?

The surveys reflect worry over two factors that are common with the perception that Europeans have of their situation: lower salaries and insecure contracts. In other words, recovery in the United States could be based on the diminishment in the quality of employment, as is likely happening in Europe — with a considerable difference: While in Europe it is still possible to believe that the worsening of labor conditions is a transitory phase that will correct itself as soon as recovery advances, impeded here by austerity policies that are not very compatible with a situation close to being stagnant even after overcoming the recession, the U.S. has been five years on the recovery path.

The current situation with the U.S. economy suggests that the basis of this debate is above all about the quality of the economic recovery — that is, if the growth pattern after the recession will be based on creating more jobs, but ones with lower salaries and less employment security. This may be particularly certain in the peripheral nations of Europe where political, economic and financial cohesion to develop expansion policies do not exist. The difference between the U.S. and Europe remains a political one: Obama has more or less managed to succeed in what needed to be done and in how to do it; Brussels has erred in one thing after another.