Establishment commentators and various apologists for the Wall Street – Washington Axis have begun to tout the recovery in the stock market as evidence that Obamanomics, or perhaps the phony spending cuts touted by Capitol Hill Republicans, have finally turned around the economy.
Much as we would welcome some favorable economic news, don’t believe it.
First of all, although Wall Street would like us to believe otherwise, the stock market isn’t the economy – it is only one measure of the economy which in itself can be measured many different ways.
While some Wall Street analysts, such as Market Watch’s Mark Hulbert, see Wall Street as having fully recovered from the Great Recession much better measures of the real economy are personal incomes and unemployment – both of which remain in an abysmal state.
The government reported unemployment to be 8.3 percent at the beginning of March, but it is actually over 16 percent because another 8 percent of the workforce has simply given up looking for work, adding in those who are “underemployed,” those who are in part-time or below skill-level jobs would of course push the number higher.
Unemployment has remained above 8 percent since February of 2009 and that is the longest continuous period of above-8-percent unemployment since the end of World War II, according to figures from the Bureau of Labor Statistics.
Likewise, real personal incomes, less transfer payments from the government, have fallen precipitously since Obama was elected – they were off by 10.7 percent at the low point in January 2011 and are still off 4.8 percent from their previous peak.
But what about other broad measures of the economy?
Overall, according to figures from the Federal Reserve, during the first years of the Great Recession, U.S. household wealth fell by about $16.4 trillion from its peak in spring 2007.
After three years of Obamanomics only a little more than half of that lost wealth -- $8.7 trillion -- is back on household balance sheets. That leaves American household wealth $7.7 trillion less than it was before the recession.
Obama supporters and the Wall Street – Washington Axis will complain that most of the lost household wealth came from declines in the value of real estate, which dropped $6 trillion, or nearly 30% of its value, from the end of 2006 to the end of 2010.
Those complaints ring false because after the Obama administration nationalized the entire debt of Fannie Mae and Freddie Mac, the federal government now controls over 90% of the home mortgage market, and has $1.3 trillion in mortgage lending support outstanding, and despite its many failed housing programs home values have continued to fall in many markets.
The gap between pre-Obamanomics household wealth and post-Obamanomics household wealth is also in stark contrast to the nation's gross national product, the broadest measure of economic activity, which has recovered all of the lost output of the recession. The bottom line – the stock market may have recovered, the nation’s industrial output may have recovered, but American families have not recovered and Obamanomics and the failed policies coming from Capitol Hill hold little prospect that they will any time soon.