The US economy is barreling towards a post-COVID boom. All it took was for the people in charge to finally learn from the 2008 recession's disastrous mistakes.
- The US
economyis finally shaking off the cobwebs and is set up for a huge post-COVID boom.
- This is because Congress, the president, and the Fed all learned from the lackluster post-2008 recovery.
- Strong and sustained support for workers and American families is going to help boost the economy through 2021 and beyond.
- This is an
opinioncolumn. The thoughts expressed are those of the author and do not represent those of his employer nor Insider.
On Wednesday, April 28, it became clear that the US economy's post-2008 malaise had finally worn off for good.
The epiphany came as I stared at my screen and saw some of the largest companies in the world report staggering numbers. Apple and Facebook shattered expectations for revenue and income as consumer spending and advertiser demand roared. Ford reportedthat semiconductor shortages would mean half of their planned production for April through June wouldn't take place as demand overwhelmed factories' ability to make chips.
Earlier in the afternoon,
Unlike the grim slogging recovery from the global
The mistakes of the past
The recession triggered by the financial crisis officially lasted from 2007 through 2009, but it was years before it truly felt over. Home prices didn't bottom until 2012, consumers steadily reduced their debt levels, and it was nearly a decade before broad measures of labor market health recovered. Manufacturing production bounced back, but not dramatically, and factories always had lots of spare capacity.
After 2008, the Fed and financial markets fretted constantly about
This lack of effort by policymakers and a rolling series of macro shocks from the debt ceiling standoff in 2011 to Brexit in 2016 slowed the household recovery from the subprime credit bubble and held back the US economy.
Inflation, investment, and
Learning from the last crisis
There were signs in 2018 and 2019 that a shift might be looming. Wage growth was strong and unemployment was low, and when the Fed got worried it had tightened a bit too much, it eased off the brakes with rate cuts that helped reverse a modest downtick in the housing market.
Over the course of that 2018 to 2019 period, the Federal Reserve ran a "Fed Listens" tour, which tried to take the tone of ordinary people instead of focusing on abstract models. When COVID hit in early 2020, the Fed was ready, and Congress stepped up too.
While COVID has carried a devastating health toll, the economy today is dramatically better off than anyone predicted a year ago. Massive monetary easing and huge fiscal support have reduced debt payments and flooded consumers' checking accounts, and businesses have - for the most part - been able to navigate the shock despite hundreds of thousands of American deaths.
The most recent Federal Reserve policy press conference was typically dry, but I did perk up when a question was asked to Chairman Powell about an encampment of houseless people that has sprung up near the Federal Reserve. Powell spent several minutes talking about those people and was obviously uncomfortable as he noted "That could be you. That could be your sister. That could be your kid."
From the ashes of a slow-growth, over-supplied economy where businesses had little pricing power, wages were weak, and economic policy failed to support already beaten-down animal spirits, we're seeing a phoenix emerge.
Cars aren't being built not because people don't have the money to buy them, but because there's too much demand for the components used to make them. Businesses are raising prices and complaining about not being able to find enough people to work. The federal government is sending checks to support households while expanding the social safety net for the first time in two generations. Homebuilders are turning away customers because they can't throw up houses fast enough.
The recession which COVID wrought was never going to look exactly like the last one, but the recoveries are polar opposites. Policymakers are taking real steps to alleviate suffering, and it's having an obvious impact on results for companies and the overall economic backdrop. Obviously, more can be done, and the follow-on legislation proposed by President Biden tries to further push the envelope in supporting children, the elderly, creaking physical infrastructure, and long-ignored industrial policy.
But aside from the policy, the data, and the
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