U.S. 2012 Outlook: Seeing the Boom Beyond the GloomYuwa Hedrick-Wong |
There has been a great deal of talk of the “decline of America,” and in this narrative the 2008/09 crisis is the tipping point. Contrary to this view, I believe that the United States remains the magnet for global talent, endowing its economy with unmatched capacity for self-renewal.
The United States is experiencing a productivity boom today. In September 2011, real GDP per employee was estimated to be 5.6% higher than the pre-crisis 2007 average. The non-financial corporate sector has become incredibly efficient and exports have correspondingly boomed in spite of the higher exchange rate. These are not cyclical phenomena, but are reflective of changing structural conditions in the U.S. economy in response to the 2008/09 global crisis—notwithstanding high government debts and stubbornly high unemployment. The productivity boom and the rise in exports are a potent mix that will facilitate accelerated business innovation and the re-industrialization of the U.S. economy in high-value-added manufacturing in the coming years.
American households have also been rebuilding their savings. Total household debt as a percentage of annual disposable income has dropped from 135% in 2007 to 115% in 3Q 2011 according to the Federal Reserve. In fact, in a period of eight quarters from the beginning of recession, U.S. households have reduced their total debt by 3% in the current recession, whereas they increased their debts by 24% in the 1982 recession, 10% in the 1992 recession, and 25% in the 2001 recession. This is despite the extraordinarily high unemployment today. A virtuous cycle could kick in beyond 2012. Modest increases in consumer spending based on increases in real income will encourage higher business investment, thereby accelerating job creation, which in turn will increase household income even further.
The current productivity boom is just part of the ongoing process of the U.S. economy adapting to new challenges and reinventing itself. The primary task of every society is to manage, survive, and master change. The U.S. is simply better at this than any other country. Change is in the DNA of American society. It is who Americans are and what Americans do. It is this ability to adapt and adjust that will enable the United States to remain the global fountainhead of innovation and creativity.
Topics: Economic Outlook