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The U.S. economy is now in “recovery” in the eyes of most economists. Gross domestic product grew at a 2.8 percent pace in the third quarter of 2009—the first growth in five quarters—and is expected to grow again in the fourth quarter. But the challenge of sustained job creation remains ahead of us.
The economy is still shedding close to 200,000 jobs per month and we have yet to have a month with net job growth since the Great Recession began in December 2007. Indeed, there are increasing indications that even if the economy continues to grow it will not do so at a pace fast enough to absorb quickly the 16 million people now out of work and searching for a job. Slow job creation in and of itself could stall the nascent recovery. Consumer spending accounts for about 70 percent of U.S. GDP and unemployed workers are unable to be the customers that businesses need to see before they hire and invest. Dampened consumption from unemployment drags down economic growth
Congress and the Obama administration understand this danger. Since January, they have taken significant steps—most notably the $787 billion American Recovery and Reinvestment Act—to get the economy back on track. In addition, the Federal Reserve eased credit conditions and continues to keep interest rates low to encourage investment. The actions of Congress, the administration, and the Fed are to be applauded. The fact that we are now emerging out of a Great Recession and not mired in a second Great Depression should not be taken for granted.
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David M. Abromowitz
Vice President, Economic Policy
Managing Director, Economic Policy
Senior Fellow; Senior Adviser, American Worker Project