In this video, David Rosenberg, chief economist for Gluskin Sheff, explains why the current economy has analysts so puzzled. The United States economy is not heading into the second dip of a double-dip recession as many economists believe, says Rosenberg. Rather, it is merely at the halfway mark of a full-blown depression.
To support his theory, Rosenberg points to economic statistics that, he says, all support the inescapable conclusion that not only is the economy in worse shape than anyone wants to admit, but that this recovery will be much longer and more drawn-out than any the country has seen in generations.
For example, according to Rosenberg, the current economic downturn has lingered longer than any other since the end of World War II in spite of unprecedented government efforts to generate a rapid recovery. If the prevailing wisdom among economists is correct, this recession is now three years into its recovery. Yet the nation is experiencing less than two percent annual Gross Domestic Product (GDP) growth. Historically, by three years into an economic recovery, the country’s average GDP growth rate has been above five percent.
Rosenberg also cites the lingering softness in the housing market, as well as dismal employment statistics. One of every seven homeowners is currently in default on their mortgages, and many are in the midst of foreclosure. On the employment front, there are five million fewer jobs today than there were in 2007, and the U6 employment figures, which Rosenberg considers the most accurate, show an unemployment and underemployment rate of nearly 15 percent. In addition, the government recently released statistics that show that the median net worth of American households dropped an eye-popping 40 percent from 2007 to 2009.
All these dismal statistics come in the context of the largest effort ever made by any administration in the history of the United States to shore up the nation’s economy. The government’s concerted efforts to create a false bottom for the economic crisis have served only to prolong the agony, Rosenberg says. In the absence of government intervention, the pain of the recession would have been much greater, but the suffering would have been over much more quickly. As it is, Rosenberg predicts another three years of recovery before the economy returns to the state it was in before the downturn began.