Call it the "excuses recovery." President Obama and his administration have been warning for the last week that the just announced first quarter GDP growth rate of 1.8 percent would be weak, and they have been quick to blame it on the recent spike prices in oil. The problem is that this whole recovery has been anemic, not just one or two slow quarters of economic growth.
Seven quarters into the Obama recovery, GDP growth has averaged an annual rate of only 2.8 percent. In contrast, since 1970, the first seven quarters of previous recoveries averaged 4.6 percent. The poor growth rate is especially surprising since the preceding recession was so severe, there should have been ample room for high growth as the unemployed returned to work. For example, the Reagan recovery followed a similarly high unemployment rate and saw the economy grow at an average annual growth rate of 7 percent (see graph here).
The slight decrease in unemployment – currently at 8.8 percent -- has been touted as good news. Yet that slight drop has largely been the result of job-seekers giving up looking for work and leaving the labor force. On top of that, the new jobs that have opened up have primarily been temporary jobs, the number of permanent jobs has actually fallen.
Given all that, Americans are understandably pessimistic about the economy. By an incredible 68 percent to 26 percent margin, The Real Clear Politics average of polls shows that Americans think that the country is headed in the wrong direction, which is the pessimism people experienced at the depths of the recent recession. By a 56 to 40 percent difference, even the liberal Talking Points Memo average of selected surveys finds that Americans disapprove of Obama's handling of the economy.
High oil prices can only explain a small portion of the recent low GDP growth. While some companies, such as those in the transportation sector suffer, others – most notably energy producers – benefit. As workers and capital investments cannot instantly move across states and from one set of jobs to another, the resulting unemployment means that output is temporarily reduced.
Ironically, however, this problem from shifting resources is no different than what happened from Obama's stimulus spending and all his new regulations. By moving money from where companies and consumers would have spent the money to where the Obama and the Democrats wanted it spent, jobs and resources were also moved.
Take a large sector of the economy such as housing. The most recent numbers show that median house price has fallen back to where it was in April 2002. Not surprisingly, with existing housing prices so low, it doesn't pay for anyone to build new housing. But even at those low prices the seasonally adjusted annual rate of sales is back to where it was over a decade ago.
But rather than blaming high oil prices, for housing, possibly the Obama administration might want to look in the mirror and ask what impact its regulations have had. On top of previous attempts to force mortgage companies into accepting write downs on the value of mortgages, the Huffington Post recently reported on the Obama administration's new "shock and awe" approach to reviving the housing market:
"The Obama administration is seeking to force the nation's five largest mortgage firms to reduce monthly payments for as many as three million distressed homeowners in as little as six months as part of an agreement to settle accusations of improper foreclosures and violations of consumer protection laws, six people familiar with the matter said."
Would you want to make a new loan if you were one of these mortgage companies? Companies might find huge drops in the value of their loans just a year or two after they are made. Fewer loans mean a drop in the number of purchases and a drop in house prices.
At some point even Democrats are going to have concede that President Obama's "cure" has made the economy worse. How many more quarters of slow growth are Americans going to have to endure?