- Days left

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."


Increase your money and finance knowledge from home

Investing in Real Estate

Learn the basics of investing in real estate.

View Course »

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

TurboTax Articles

What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

Add a Comment

*0 / 3000 Character Maximum

72 Comments

Filter by:
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.

NYC GETS NUKED

September 30 2011 at 1:10 PM Report abuse -2 rate up rate down Reply
some12bo

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
scottee

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
mrbjaw

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
some11bo

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
Gumby

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
goldaxe

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
Gumby

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
Gumby

This issue is so easy to understand yet you are stil incapable of adapting to the new realities.
11

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

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
Gumby

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 govenment?? NAH NAAAAAAAAAAAAAAAAAAAAAAH! not so!
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