Call it the fitting end to Recovery Summer. Joe Biden promised us 500,000 new jobs a month, but instead we have the Fed warning that even the meager growth seen in the past few months may be reversing itself. The new “beige book” from the Federal Reserve warns that “widespread signs of deceleration” will slow the American economy even further:
The U.S. economy continued growing this summer but “with widespread signs of deceleration,” according to a new report on business conditions around the country.
The Federal Reserve’s “beige book,” an eight-times-a-year compilation of anecdotal information from companies in the 12 Fed districts, offers a portrait of an uncertain economic moment in which growth has slowed in much of the United States.
“Economic growth at a modest pace was the most common characterization of overall conditions,” said the report, released Wednesday afternoon and based on interviews with businesspeople from mid-July through the end of August. However, five of the regional Fed banks east of the Mississippi River “highlighted mixed conditions or deceleration in overall economic activity.”
The “burst” of growth in 2009Q4 and 2010Q1 has dissipated, the report explains, and so has consumer confidence along with it. Once the stimulus money slowed, so did growth. That should be a signal that the stimulus spending from Washington didn’t actually solve the structural problems of this recession, which remain tied to high unemployment and spiraling public debt.
Consumers are not spending money, the Fed warns. Many households have turned to debt reduction rather than consumption, which in a time of high unemployment makes a lot of sense. Revolving credit debt has dropped dramatically, which will make for stronger consumers in the long run but for poor retail sales in the short run. It could mean a substantial shift in consumer patterns for a long time to come, which joblessness and uncertainty in business will only prolong.
Private sector jobs do not get created by short-term government stimulus. In order for businesses to create permanent jobs, they need to see prospects for actual and sustainable growth in an economy, not short-term spikes created by government dumping cash into roads, bridges, and old cars. The projections for declining growth by the Fed corroborate this, and point to the real problems of overregulation, capital destruction and seizure by Washington, and an out-of-control Congress whose spending will eventually have to be covered by the taxpayers.