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Economists discussing the sluggish state of the economy at a media breakfast held by the New York State Society of Certified Public Accountants this week, offered up a variety of explanations for the lasting economic malaise, ranging from the housing crisis fallout to structural unemployment.

It's the Economy, Stupid

The Great Recession hasn't led to the "V-shaped" recovery -- marked by a deep recession then a sharp recovery -- that's characterized prior recessions, said Joseph Tracy, executive vice president and special adviser to the president for the Federal Reserve Bank of New York, during his presentation.

More than two years after the recession was declared officially over, "We still haven't experienced this sharp, economic growth." Much of that can be pinned on what Tracy called a major shock to the economy. "The rise and fall in housing prices wiped out $6.5 trillion in housing growth," he said.

The bust has left a lingering mess in its wake, sending households' net worth down to 1980s levels, generating $700 billion in negative equity as 25% of homeowners owe more to lenders than their homes are worth, and triggering a rash of foreclosures, Tracy said.

The after effects of the housing downturn -- compounded by job losses -- will remain a headwind the nation will continue to reckon with for about five to seven years, Tracy said.

Not All Doom and Gloom

The economists also noted key indices like higher industrial production and a rise in personal consumption, which suggest that a meaningful improvement in the country's financial fitness could unfold.

Leading indicators also suggest "an economic growth pattern has been restored," said Steven Cunningham, director of research and education for the American Institute of Economic Research, conceding the idea might sound Pollyanna to some.

The Chicago Feds National Activity Index, a monthly index designed to gauge overall economic activity and related inflationary pressure, was down merely 0.43 in August, Cunningham said.

An index of "0" means "the economy has come back to a trend growth rate, another cause for optimism.

"Business is trying to come back, production is increasing," Cunningham said.

Growth in industrial production of consumer goods, such as home electronics, for example, is another positive sign, he said.

The Unemployment Conundrum

Despite some upbeat statistics, the stubbornly high 9.1% unemployment rate can make talk of the nation's economic recovery seem hollow.

Cunningham cited structural unemployment, the disconnect between labor market needs and the skill set of the workforce, as one part of the problem.

The country is short on job candidates qualified to fill traditionally white collar positions, like engineering, which are on an upswing, while jobs that require less education, such as construction, are waning, he argued.

Throughout the economic downturn, higher education levels have corresponded with lower unemployment rates.

For one, the unemployment rate of Americans with a bachelors degree is 5.4%, nearly half that of people with only a high school diploma, he said, citing figures from the Bureau of Labor Statistics.

"It makes sense. We're in an information economy, not a mass production economy."

Joblessness is yet another symptom of the housing crisis, Tracy said.

Prior to the downturn, Americans were tapping into the equity in their homes. That capital has been cut off, which has "handicapped would-be entrepreneurialism to self-fund businesses," and has stifled the formation of new businesses.

Fixing the housing crisis was an after thought in the Obama administration's recessionary policy intervention plan to stimulate economic and labor market growth, "which was a mistake," Tracy said.

Still, to a large extent, the government's hands are tied, said Stanley Goldstein, CPA, founder of the New York Hedge Fund Roundtable and Goldstein Golub Kessler & Company.

"The government can't do as much as we or they think, irrespective of who's in the White House," Goldstein said. '"It takes a 3.5% [economic] growth rate to really create jobs."

For one, "Big companies don't create jobs, they cut jobs. Smaller companies create jobs, but it's very hard to stimulate that now," as small businesses have been hesitant to hire in this economic climate, he said. "The natural drivers of the economy are not moving right now."

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Morris Cantonitis

It's corruption, stupid from the Wall Alley PIGGS, SEC and FED Reserve. It's all INSIDE.

The PIGGS they wait until the basket is full and they have enough bites, then DOWN the market goes, forget about spikes.


September 30 2011 at 1:10 PM Report abuse -2 rate up rate down Reply

The only solution is a revolution to switch to debt free monetary system and take the power to create money from private banks and give it to the people. Interest for new money should not be paid to the banks, but it should be paid to the people. Google for "How do banks create money" to understand the fundamental cause of our problems.

September 30 2011 at 11:02 AM Report abuse -3 rate up rate down Reply

no, it' all spending and debt. which is not sustainable. for anyone...any country, any business, any household, any person.

September 30 2011 at 7:42 AM Report abuse +1 rate up rate down Reply

Let's go drink our Cool-Aid and pick on Big Oil, last year XOM made about 9 1/2% profit per dollar invested, the same time P&G made about 16%, why don't we go after the cost of tooth paste? And as the price or oil goes up, so does the cost of everything else, from the gas for your car, to the cost you pay for the carpet in your house. We have oil here to drill for, on land, But nobody wants "it in their back yard". As for energy, there's other ways to produce electricity. Yes, we have wind and solar, but then again, "not in my back yard". What about methane gas? You can get all you want from any land fill, Olin Corp had a treatment plant running on methane back in the 70's. I could go on, but why confuse the cool-aid drinkers with facts, they just rather believe the information that is fed to them buy whom every sounds the best, instead of doing some homework for them self's.

September 30 2011 at 7:23 AM Report abuse +3 rate up rate down Reply

The situation is hopeless. For many decades, due to FED's easy money policy, Americans have borrowed and spent. This inflated the money supply, prices and salaries (inflation). But now borrowing has stopped. We ran out of borrowers. M3, which is broad definition of money supply, is deflating. With a deflating money supply it is not possible to pay the same salaries in the economy. For example, with money supply of 50 trillion, if avarage salary is 50K USD, when the money supply falls to 40trillion, average salary will have to fall to 40K. This is the reason why we have unemployment. State and local governments are going bust. Their programs, pension plans were built based on an inflated money supply. When deflation hits, states, local governments have to cut back spending drastically, or declare bankcruptcy. And where are the stocks?? Still up and running. Google for "financial mania continues" to understand the stock market bubble we have.

September 30 2011 at 1:45 AM Report abuse +3 rate up rate down Reply

BIGOTRY still rules and are still alive and well!! kICK IT OUT NOW!

September 30 2011 at 1:03 AM Report abuse -4 rate up rate down Reply
1 reply to Gumby's comment

People like you wine all the time,and distract the government from the important issues.Oh and FYI I am for regulations.Any one with brains is.Like the ones that regulate offshore/onshore oil companies,or sub prime mortgauges,derrivitives.I am for the old,poor,and working class.I dont invest in oil,or oil co.

September 30 2011 at 3:08 AM Report abuse rate up rate down Reply

Bigotry is a possible explanation for all or your status quos..
Bigotry is already getting worse than terrorismm..
Our Homeland Security ought to start looiking deeper into the Great American Bigotry!!

September 30 2011 at 1:02 AM Report abuse -3 rate up rate down Reply

This issue is so easy to understand yet you are stil incapable of adapting to the new realities.

September 30 2011 at 1:01 AM Report abuse -4 rate up rate down Reply

I knowhow to play ABC blocks better than all of you!!

September 30 2011 at 1:01 AM Report abuse -4 rate up rate down Reply

Dont you notice that once oil prices start climibing back in 1970's we start digging deeper into debts of all sorts .... not to mention moving jobs overseas , etc... We still havent won our energy independence back at all and will never ! Dont let any Repoublican con you into believing so... They said the same sh** since Reaganomics and we are still guzzling gasolikne like morons ... Only , only if the Republicans asked us to conserve oil... all would be hunky dory ... Republicans blew it big time.... GM and Ford is now busy shrinkinig or crunching all car models to deliver 50 mpg or higher... Where were REpublicans or economists that talked all day about fitnesss.. All is bull! Maybe they will try to lure us back to V8 engines simply because we are bored ... We will never learn that we still bigger government as our economic nanny forever.. It is the Republicans that causes our govenrmnt to get bigger and fatter... You voted for GOP all your damn faults!! not mine!! You behaved like childish enegy consumers all too immature and irresponsible about Mother Earth and Polar Bears drowining for lack of ice floes thanks to global clmate warming... blah blah blah who is to blame but yourselves..1
Big Oil is only trying to be bigger than our government and this should be self explantory already!!! to the dullest mind ever walking on Earth!!

September 30 2011 at 12:59 AM Report abuse -2 rate up rate down Reply