You Call This a Recovery?

By Foroohar, Rana | Newsweek, August 16, 2010 | Go to article overview

You Call This a Recovery?


Foroohar, Rana, Newsweek


Byline: Rana Foroohar

Why the American worker is suffering.

According to the Obama administration, this is the Summer of Recovery: the global recession is over, factories across America are ramping up production, and corporate balance sheets are dripping black ink. So why does it still feel more like a Winter of Discontent (albeit with 90 percent humidity)? Even as Fed chairman Ben Bernanke is talking up the end of recession, new data out last week showed that economic growth in the U.S. was lower in the second quarter than the first, and that the downturn of 2009 was worse than we thought. Sure, the economy is technically growing again, but not by as much as economists had hoped. And despite record company profits, unemployment remains as high as in many parts of sclerotic Old Europe.

At least the continentals will be spending August on the beach. American workers, fearful of continued layoffs, are scrambling to put in more hours on the job. Meanwhile, wages are still flat. All this underscores what I believe is one of the most important economic trends of our age--the increasing disconnect between the fortunes of multinational companies and their countries of origin. What little recovery America is seeing can be chalked up to rising sales and profits within the biggest U.S. companies; top firms are sitting on "mountains of cash," says Global Insight chief economist Nariman Behravesh. But that's not because American consumers are spending--indeed, last week's data dump proved that Americans are saving even more than we thought--6.4 percent of their income rather than 4 percent, a rate not seen since 1993. Consumers, whose spending makes up by far the largest share of the U.S. economy, are not feeling secure yet. Those bulging corporate profits are largely attributable to sales abroad.

Just look at the jump in U.S. export growth, typically about 7 to 8 percent a year, but now in the double digits. The majority of manufacturing industries in this country, from electronics to furniture to consumer goods, are growing strongly because of demand in places like China, Brazil, and India. It's no wonder customers in these emerging-market giants are feeling flush--their nations have come through a global recession without so much as a hiccup, and their job prospects are good and getting better. …

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