Economic recovery is now widely accepted as well underway. Turns out there was no double dip and growth has been better than expected so far this year. The week-end papers are full of stories of recovery in the services sector, construction, the housing market – and, to top it all, even a better trade balance.
So no crisis indeed? Well – it’s no great surprise that zero interest rates year after year should eventually lead to this. As I said in an early post, it’s very difficult to kill off growth for any great length of time, since companies will always look for ways of producing more with less. Then it’s just a matter of making sure someone has the wherewithal to do the purchasing – at home or abroad. On the basis of this week’s data that looks to be jointly split between domestic consumers and export markets.
Dig deeper and the good news headlines are accompanied by more guarded commentaries, about the over-reliance on consumer spending, the reflating of the housing bubble and the uneven gains that see a soaring housing market in London sitting uncomfortably alongside a parallel world of food banks and zero hours contracts for the underemployed. The real debt crisis rumbles on, with the Resolution Foundation saying 1.25 million households will have to spend half their income on mortgage repayments if interest rates rise 2% higher than forecast, and there isn’t a corresponding pick up in wage growth. How likely is that? Not very. But it means a lot of political pressure to keep rates low.
And it’s also true there isn’t that much to get carried away about. Growth still seems likely to be no more than 1% this year and output remains over 3% below the boom-time peak.
But there can be no doubt these figures do change the terms of debate. It does now look as though the immediate economic future is going to very closely resemble the past. All the portends, predictions and – yes – hopes of a rebalanced economy, a new paradigm, the ‘new normal’ emerging from the crisis of capitalism are beginning to ring a little hollow. “Crisis? What crisis?” indeed.
Only more so – since the division between economic winners and losers has become even more stark, as a sort of super-flexibility in the labour market leads to desperate people willing to accept under-employment and real wage cuts over no employment. The cause of the productivity puzzle is becoming clearer. People are desperate to remain in any sort of work. And, as important, businesses are prepared to keep them on despite facing lower orders. So employment hours have fallen but not by as much as output. Hence productivity has suffered.
You can either regard this as a more socially cohesive response to recession than the shock tactics and mass lay-offs of past downturns, or bemoan the lack of worker protection that allows companies to get away with it. But you can’t really argue that the jobs people would like – or the lives they would like to lead – are not being provided. The crisis may be over – dealing with its fall-out is certainly not.