Digging out of That 'Big Hole'
Gross, Daniel, Newsweek
Byline: Daniel Gross
Pundits will say President Obama's poll numbers are rising because he can define himself against the GOP, he's cutting deals, and he's shifting to the center with new appointments. Bollocks. Most Americans can't tell Bill Daley (the new, corporate-friendly chief of staff) from Rahm Emanuel (the old, corporate-friendly chief of staff). No, Obama's slowly improving political fundamentals--just in time for his State of the Union address, thank you very much--can be attributed to steadily improving economic fundamentals. In early January, he said, "We've got a big hole that we're digging ourselves out of." But how much of the shoveling is behind us--and how much more do we have left? We offer a progress report on the recovery.
In the annals of financial contractions, the Great Recession was an unusual one--for its length (18 months), origins (housing, credit, fatigued consumers), ferocity, and depth (for half a year, the economy shrank at a cataclysmic 6 percent rate). It's also been unusual for the herky-jerky recovery. Typically, the American economic juggernaut comes roaring out of hibernation once factories and stores work off excess inventory and recall laid-off workers. Not this time. The economy was led into recession by the coasts, where the collapse of expensive, highly leveraged housing markets wreaked the greatest havoc; by high-growth -housing-boom metroplexes like Las Vegas, Phoenix, and Miami; and by free-spending consumers with debt. And it was led out of recession by foreigners and flyover country. The grain- and energy--producing heartland (the unemployment rate in North Dakota is 3.8 percent) powered through the downturn because global demand kept prices for oil, soybeans, and wheat high. Exports began to rise in spring 2009, while the economy was still mired in recession, and have bounced back impressively. They were up 15 percent in 2010.
Consumers were generally spectators during the first phase of the recovery. …