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US economy in deep hole

Economic indicators show the US economy is improving, citing growths in US GDP and stock market rises; however that is not enough to save an entire economy.

Dean Baker, the author of “False Profits, Recovering from the Bubble Economy” and the co-director of the Center for Economic and Policy Research explained the US economy is in a deep hole, it’s an extraordinarily bad economy when you also consider job growth and unemployment.

In a context where you have an economy that has so much unemployment, you have tens of millions of people either unemployed or under employed you expect to see much more rapid growth. Just as a benchmark number here, if the economy is growing about 2.5 percent, then we’re just treating water. That’s enough to keep pace with the growth in the labor market. 3.2 percent, that’s going to bring down the unemployment rate a little bit by the end of the year. If we continued at this rate we won’t get back to normal rate of unemployment, say 5 percent of unemployment, till say, 2018 or 2020,” he explained. “You could always say it could have been worse, but this is not anything I would want to celebrate.”

Inflation, pumping cash into the economy, does not secure a strong growth future, many experts argue. Prices are rising, yet salaries are not. Many Americans cannot keep up.

There is low demand for goods and service in the economy, thus prices are begin forced up by the market.

What we really do need is more demand in the economy. That’s what will generate jobs,” Baker explained. “We need an economy that is growing on a sounder basis.”

Many companies are sitting on large quantities or money and open jobs, but are not filling them because market demands remain low, he argued. It is more about demand than corporate taxes and regulations.

The US economy will continue to suffer high unemployment unless demand is addressed. He explained wage driven growth is the solution, via productivity which will drive increased demand.