America's Lost Decade Now In Its Eleventh Year

The second Summer of Recovery is right around the corner. Break out the suntan lotion, throw some USDA canner-grade hot dogs on the grill, and pop open a frosty can of reality about the last ten years of economic stagnation, courtesy of Calculated Risk

There are currently 130.738 million payroll jobs in the U.S. (as of March 2011). There were 130.781 million payroll jobs in January 2000. So that is over eleven years with no increase in total payroll jobs.

And the median household income in constant dollars was $49,777 in 2009. That is barely above the $49,309 in 1997, and below the $51,100 in 1998. (Census data here in Excel).

Just a reminder that many Americans have been struggling for a decade or more. The aughts were a lost decade for most Americans.

And I'd like to think every U.S. policymaker wakes up every morning and reminds themselves of the following:

There are currently 7.25 million fewer payroll jobs than before the recession started in 2007, with 13.5 million Americans currently unemployed. Another 8.4 million are working part time for economic reasons, and about 4 million more workers have left the labor force. Of those unemployed, 6.1 million have been unemployed for six months or more.

The "lost decade" refers to the stagnation of Japan's economy under a policy of supporting failing banks, propping up of zombie industries, attempting to inflate real estate prices, and maintaining artificially low interest rates. In Reason's July 2009 cover story, and in this related video, Anthony Randazzo, Michael Flynn and Adam B. Summers noted the way President Obama's stimulus was setting the stage for another period of stagnation. Here's a Reason commenter claiming, back in the good old days of Quantitative Easing Part I, that monetary stimulus was needed to prevent a lost decade. Even Paul Krugman, the doctor, noted the similarities before deciding that Japan's last decade wasn't such a bad thing after all

The largest, most brilliantly planned Keynesian stimulus since His Lordship died has now failed spectacularly. Even the financially doomed New York Times has to admit all this money printing isn't going anywhere. But it has succeeded in one area: destroying confidence in the dollar and giving a new head of steam to the decade-long bull market for gold. 

But as Calculated Risk indicates, the phenomenon of anemic growth masked by easy credit dates back much further. How long will it take until the economy reaches equilibrium or market-clearing or whatever you want to call it when massive misallocation gets reallocated? That depends how far back in the past the misallocation started. Looking at the quadrupling of house prices and the 40 percent decline in the equity portion of home ownership (the segment of current market value that is actual ownership rather than debt), I think you could make a case that the real estate bubble began before the Clinton Administration. Ditto the cost of a college education, another asset that has received vast attention from the government and has vastly inflated over more than a decade. In fact, given that American workers now compete globally against workers who make a fraction as much, who can say that seemingly flat income figure isn’t higher than it would be without constant monetary expansion? 

Respectable public policy means you’ll never know the answer. At any hint of deflation, the same crew of male hysterics who were wrong before and during the great credit unwind will be back with more deliciously diabolical designs. They can keep that up indefinitely; Japan’s lost decade has now been going on for more than twenty years. I’m beginning to rethink my hard questions for Tad Lumpkin about his more timely than ever end-the-Fed cartoon American Dream

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Achtung Coma Baby||

  • ||

    At any hint of deflation, the same crew of male hysterics who were wrong before and during the great credit unwind will be back with more deliciously diabolical designs

    Because they will never, ever, pay for it. Moral hazard, anyone?

  • Rrabbit||

    I agree that the real estate bubble began before Clinton. And there will be more such bubbles as long as Washington is willing to bail out some of those who lost money in a bubble.

  • ||

    I agree that the real estate bubble began before Clinton.

    the you agree with a falsehood:

    http://en.wikipedia.org/wiki/F.....values.jpg

  • ||

    Here is another graph that deflates your perception:

    http://www.jparsons.net/housingbubble/

    I can post these all day if you want.

  • ||

    Here is a third graph.

    This one is great because it was published before the popping of the bubble:

    http://www.nytimes.com/imagepa.....raph2.html

  • johnl||

    sed "s:before the Clinton Administration:before 2000, during the Clinton Administration"

  • Warty||

    Fuck your depressing reality, Cavanaugh. I only pay attention to baby animals from now on.

  • ||

    Mr. Meryl: But you got killed in the ratings by Craig's new show.

    Stan: Craig's new show?

    Mr. Meryl: Yeah. It's called Close-up Animals With a Wide Angle Lens, Wearing Hats!

  • Warty||

    Did you listen to it squee, you motherfucker? LISTEN TO IT FUCKING SQUEE.

  • ||

    I don't suffer from the same sexual fetishes as you, Warty, so I have no need. Also, I don't have audio at work.

  • Warty||

    You need a new job.

  • ||

    Can you imagine how long it took to find somewhere for him to work that didn't care about the tracksuits and reek of Drakkar Noir in the office? Computer audio is a fair trade.

  • Tman||

    The deal closer was the parking space that could fit his mid-80's IROC Camaro.

  • ||

    Drakkar Noir?!? You've gone too far this time, buddy!

  • ||

    Did you finally modernize by sporting a chocking fog of Axe Body Spray Maximum Smegma Scent?

  • ||

    But their commercials show extremely hot women irresistibly attracted to Axe! It must be true!

  • Warty||

    You people don't want to know the lengths I went to obtain this footage of Epi in his natural habitat. "Wha! Wha! Wha!"

  • Pham Nuwen||

    Jesus! That was painful to watch. I was so certain his elbow was gonna dislocate like that one dude in Over the Top.

  • ||

    I wonder if he treats his spleen that poorly.

  • ||

    Sorry Epi, I thought he was dissing Sugar. I will do evil to myself now like look at some Janet Reno Porno.

  • kinnath||

    I posted this one last week.

  • sounds real good||

    How am I supposed to write cover letters to apply for more part-time jobs without benefits if people keep talking about economic reality and then posting videos of baby animals? First they bring me down, then they flood my brain with oxytocin, then I get all blissed out and sleepy and take a nap.

  • ||

    America's Lost Decade Now In Its Eleventh Year

    Oh, great! Now there is "time inflation" as well.

  • ||

    I'm surprised that our "leaders" don't blame economic inflation on the inflation period theorized after the Big Bang. Why not? No less bullshit than what they say about it, anyway.

  • Rich||

    Oh, for cute!

    However, in fairness, I must remind you that President Obama has "bumblefoot" as well.

  • Rich||

    Argh! @ Warty.

  • Warty||

    Silence! Don't make me bust out the cheetah cub and his puppy friend on you.

  • cls||

    More conspiracy crap about the Fed being a "private bank." Why do sane people believe this sort of rot.

  • 9/11-Birther-Porno-FedBank||

    George Bush crashed the Fed into the World Trade Center to hide Barack Obama's Kenyan birth and subsequent child pornography charges.

  • Ben Bernanke||

    Hah! We're about as "private" as they come!

  • Kolohe||

    Here's a Reason commenter claiming, back in the good old days of Quantitative Easing Part I,

    Feb 2011 was some 4 months after Quantitative Easing Part 2 was announced
    http://money.cnn.com/2010/11/0....._decision/

  • Warty||

    I had forgotten about SM. All our trolls run together, sort of like the slurry of semen and blood that comes out of rectal's orifices.

  • ||

    You would know.

  • Achtung Coma Baby||

    It's more of a chocolate sundae of semen and shit with a strawberry syrup topping of blood.

  • Warty||

    Slurry, I says.

  • Achtung Coma Baby||

    And I say SUNDAE!

  • ||

    Butt-spooge meringue.

  • Warty||

    Oh shit, that was the guy who was trying to intimidate us by the fact that he's heard of game theory. I was wondering which one that was.

  • Tim Cavanaugh||

    I must have put in the wrong link. Close your eyes and just imagine that it's a post from 2009 wherein shrike is patting him/herself on the back for having called a bear market in gold, at the expense (shrike claims) of R C Dean. I will look for that comment, and if I find it I'll replace the link.

  • ||

    Well, I know many of you were scoffing at my gold-buggery, when was it, 40% ago?

    Because I love, another investment idea: short Treasury bonds. Yes, there are ETFs for that.

  • ||

    Because I love, another investment idea: short Treasury bonds. Yes, there are ETFs for that.

    :o

    Ok what is an ETF and how are they used to short Bonds?

    I sold some property and I think I want to do this. (not a lot but enough so I can say I bet against Obama's economy)

    Also what sort of time line are you looking at?

  • ||

    ETF: exchange traded fund.

    Do a little research (I suggest Googling "ETF short Treasury" to start with) on what's available.

    An ETF that is shorting Treasuries will hold a portfolio of instruments for that purpose. You buy your ETF shares, and if Treasuries go down, your share price goes up.

    ETFs like this tend to be expensive (fees, plus the way they recalculate their value every day). So, be wary. Their best use is when you think some serious volatility is about to hit (IMO); I see them as short-term speculation-type investments. So, be wary.

  • ||

    I see them as short-term speculation-type investments. So, be wary.

    Ouch.

    I will probably stay away...still thanks for the info.

  • Scooby||

    I love it. You can also buy/sell/short options on the leveraged short ETFs. Of course, the open interest is pretty thin, but you can leverage your bets investments even further.

  • ||

    When you think about it, 9/11 was a sign of what was to come. All the gubmint screws the pooch on that one, only the passengers come through and partially abate the terrorists.

    So, the public is rewarded by government with a new agency, the TSA, whose sole purpose is to constantly assault passengers, while doing nothing to avert any kind of terrorist threat.

    Throw in that the U.S. is missing 15 million real jobs that should have been created in the aughts, and we got about 3 million more government employees than you'd expect us to need, it's possible that just freezing spending, and sending bureaucrats scurrying to protect their own, will finally allow the private sector to grow again in real terms*.

    Or else, we'll end up like a giant Cleveland, with horrible schools, vacant housing, lousy infrastructure, businesses fleeing, and RFID tags on our trash bins to make sure we're recycling.

    *Vaguely, improvements in productivity technology (IOSc, Android, 3d printing), and massive oil discoveries (Bakken, South Texas), coupled with labor stability and surpluses of power ought to make the teens a better time for America. I hope so, but... new rules on 1099k withholding from my merchant account provided are making me look into offshoring my business again.

  • ||

    Financial implosion during the aughts will auger the old Chinese proverb 'May you live in interesting times' all too true.

    And of course the dark-horse of dark horses, all four horsemen in one, lurks statistically closer and closer...and that of course is a nuclear detonation in a major city.

    Whether that happens in the USA or abroad, it is only a matter of time and the Big Wildcard for anything about the future, at least in my opinion.

  • Tim Cavanaugh||

    We're past the aughts. Welcome to the teens.

  • Doesn't that start in 2013?||

  • ||

    I think you could make a case that the real estate bubble began before the Clinton Administration.

    Tim could you pretty pretty please with sugar on top explain this?

    Note: See how nice and civil I asked...i didn't even drop an f-bomb. That is worth something right?

  • Tim Cavanaugh||

    Sure, it's worth...nothing!

    Ha ha. Maoist self-criticism: "you could make a case" is my weasel phrase. Also my call to action: Somebody who has the resources, please check out my hypothesis and see if you come up with anything interesting (including a refutation).

    Hypothesis: There was a pretty intense rolling real estate bust throughout the 1980s, that over time hit regions as diverse as Texas (where I believe Midland experienced what is still the longest peak-to-peak-recovery real estate recession in U.S. history) and the barrier islands of New Jersey (which bottomed in the early 1990s, at which time my mom sold the house I grew up in, receiving in exchange a hatful of both blue and red beads).

    I'm going by memory, but I believe you'll find a large number of real estate markets (even NYC!) in troughs of varying depths by the early 1990s. While most places recovered very slowly (the usual pace in real estate, whatever bad lessons the past decade may have been teaching), the journey from late eighties/early nineties prices to late aughts prices have been broadly uphill at a pace that is unusual if not unique among two-decade periods in U.S. history.

    You will note that all markets are regional, which is why I say "large number of real estate markets." I don't know if the majority of self-identified real estate markets ever truly bubbled, but clearly enough did to create an immense drain on national wealth. Given the invention of REITs, MBSs, etc., I even think you could say it was a drain on international wealth.

    Much as I'd like to believe we're going back to GHWB-era prices, I don't even believe we're going back to Bill Clinton-era prices. The "recovery," however it's manufactured, will be declared long before this hard land gives back that much value.

    If you were really being polite you'd credit me for modesty. When I wrote that "Houses of Pain" piece I was satisfied that a meta-real-estate bubble had begun inflating before the Reagan administration. I'm less confident in that belief now.

  • Anonymous Coward||

    There are currently 130.738 million payroll jobs in the U.S. (as of March 2011). There were 130.781 million payroll jobs in January 2000. So that is over eleven years with no increase in total payroll jobs.

    And the median household income in constant dollars was $49,777 in 2009. That is barely above the $49,309 in 1997, and below the $51,100 in 1998.

    Mr. Cavanaugh, nearly everything you blog on Reason depresses the fuck out of me.

    Time to go hit the bottle.

  • ||

    That payroll number is worse than it looks, because the size of the workforce is bigger now than it was in 2000.

  • The Truth||

    Quite the contrast to the rising China of the same decade, isn't it?

    GDP is up, real median income and real wages skyrocketing, a rising middle class, etc.

  • ||

    Quite the contrast to the rising China of the same decade, isn't it?

    You may as well be comparing the US of today with the US of the 1950s.

    The Apple and Orange levels of development.

    Also should be noted that China's rise parallels the opening of their production and labor markets while our fall parallels the closing of ours.

    Funny how your solution is to close our markets even further.

    The horse is dead...so beat it more.

  • Tim Cavanaugh||

    The strange thing is this assumption (which La Verdad may or may not be assumptionizing) that libertoids are going to be really upset about China's prosperity. I'm not sure why anybody, other than The Donald, would be upset about China's prosperity. But I especially don't understand why libertarians would be upset about it.

  • ||

    Bingo.

    I prefer fat and happy Chinese to lean and hungry Chinese.

    ---

    I also prefer Cantonese to Sechzuan, but that's a whole other wok.

  • ||

    Alright, I give up. What's your angle here? What is your endgame?

    You are a remarkably one-note poster, so I'm assuming you're in it for more than lulz.

    Are you selling chinese repellant? Maybe land in the Guangdong province? Is yellow your least favorite color?

    Help me out here.

  • Red Rocks Rockin||

    GDP is up, real median income and real wages skyrocketing, a rising middle class, etc.

    Considering their economy is entirely dependant on the American consumer's ability to buy their exported goods, I wouldn't be so quick to crown them kings just yet. If we go down, so do they.

    Russia will still be the Lords of Asia long after the Chinese Great Depression.

  • Cytotoxic||

    This is a good article, but that video does not belong on Reason. That stuff about the Fed Reserve being an NGO private bank is bunkum, and so are some other statements on there. They actually imply Kennedy was assassinated for threatening the Fed! Keep Alex Jones out of Reason.

  • ||

    Sorry, but that cartoon is insane. It implies that the Fed had Kennedy assassinated for signing an executive order giving the Treasury the power to print money independent of the Fed.

  • han||

    Inflationists, deflationists, monetarists, goldbugs, Keynesians, Friedmanites, Austrians, freshwaterists, saltwaterists, Grid Epsilon Irregulars and others are urged to listen in.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement